NEXPOINT DIVERSIFIED REAL ESTATE TRUST 10-K

Item 8. Financial Statements and Supplementary Data Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm 97 Consolidated Balance Sheets as of December 31, 2024 and 2023 99 Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years Ended December 31, 2024 and 2023 100 Consolidated Statements of Equity for the Years Ended December 31, 2024 and 2023 101 Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023 103 96 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Trustees of NexPoint Diversified Real Estate Trust: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of NexPoint Diversified Real Estate Trust and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive income (loss), equity, and cash flows for the years then ended, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Fair value measurement of level 3 investments As discussed in Notes 3 and 9 to the consolidated financial statements, the Company has $643.4 million of investments that are measured at fair value on a recurring basis, a portion of which uses inputs that are classified within Level 3 of the fair value hierarchy as of December 31, 2024. The Company uses an income approach, market approach, or a combination thereof to value each of these investments. Establishing fair values for these Level 3 investments is inherently subjective and dependent upon significant unobservable inputs and assumptions. We identified the evaluation of the fair value measurements for certain Level 3 investments as a critical audit matter. Complex auditor judgment and the involvement of valuation professionals with specialized skills and knowledge were required to evaluate certain assumptions used in the Company’s determination of the fair value measurements. Specifically, for investments that used the income approach, the assumptions included the capitalization rates, market rent, discount 97 Table of Contents rates, and discount applied to net asset value. For investments that used the market approach, the assumptions included the discount applied to net asset value. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design of certain internal controls used in the fair value measurements process, including controls related to the assumptions described above. We involved valuation professionals with specialized skills and knowledge who assisted in: • evaluating the capitalization rates and discount rates by comparing them against ranges that were independently developed using publicly available market data for comparable properties • assessing the appropriateness of the market rent assumptions by comparing them to comparable transactions and current listings of comparable properties • determining the appropriateness of the discount applied to net asset value by comparing it to industry data available for comparable publicly traded companies /s/ KPMG LLP We have served as the Company’s auditor since 2022. Dallas, Texas March 31, 2025 98 Table of Contents NEXPOINT DIVERSIFIED REAL ESTATE TRUST AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share and par value amounts) December 31, 2024 December 31, 2023 ASSETS Consolidated Real Estate Investments Land $ 62,227 $ 47,708 Buildings and improvements 312,200 206,213 Intangible lease assets 10,979 10,979 Construction in progress 24,689 19,177 Furniture, fixtures, and equipment 10,124 362 Right-of-use assets ($ 712 and $ 0 with related parties, respectively) 2,176 — Total Gross Consolidated Real Estate Investments 422,395 284,439 Accumulated depreciation and amortization ( 35,002 ) ( 20,525 ) Total Net Consolidated Real Estate Investments 387,393 263,914 Real estate held for sale 29,890 — Total Net Real Estate Investments 417,283 263,914 Investments, at fair value ($ 493,909 and $ 533,065 with related parties, respectively) 643,432 691,238 Equity method investments ($ 407 and $ 7,079 with related parties, respectively) 54,429 66,263 Investments in DSTs ($ 30,559 and $ 0 , with related parties, respectively) 30,559 — Cash and cash equivalents 8,791 20,608 Restricted cash 40,110 32,561 Accounts receivable, net 4,463 4,347 Prepaid and other assets ($ 7,315 and $ 3,586 with related parties, respectively) 17,500 10,431 Accrued interest and dividends 5,495 6,078 Interest rate caps 159 — Deferred tax asset, net 2,618 2,896 Total Assets $ 1,224,839 $ 1,098,336 LIABILITIES AND EQUITY Liabilities: Mortgages payable, net ($ 10,000 and $ 0 with related parties, respectively) $ 261,945 $ 142,186 Notes payable, net ($ 66,731 and $ 20,000 with related parties, respectively) 90,888 52,919 Prime brokerage borrowing 1,222 1,782 Accounts payable and other accrued liabilities 22,739 8,633 Income tax payable 255 356 Accrued real estate taxes payable 226 231 Accrued interest payable 8,724 1,398 Security deposit liability 389 422 Prepaid rents 1,053 768 Intangible lease liabilities, net 3,139 4,567 Lease liability ($ 721 and $ 0 with related parties, respectively) 721 — Total Liabilities 391,301 213,262 Equity: Shareholders' Equity Series A Preferred shares, $ 0.001 par value: 4,800,000 shares authorized; 3,359,593 shares issued and outstanding 3 3 Common shares, $ 0.001 par value: unlimited shares authorized; 42,679,569 and 38,389,600 shares issued and outstanding, respectively 43 38 Additional paid-in capital 1,039,280 1,011,613 Accumulated earnings (loss) ( 202,818 ) ( 126,580 ) Total Shareholders' Equity 836,508 885,074 Noncontrolling interests ( 2,970 ) — Total Equity 833,538 885,074 TOTAL LIABILITIES AND EQUITY $ 1,224,839 $ 1,098,336 See Notes to Consolidated Financial Statements 99 Table of Contents NEXPOINT DIVERSIFIED REAL ESTATE TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (in thousands, except per share amounts) For the Year Ended December 31 2024 2023 Revenues Rental income ($ 271 and $ 222 , with related parties, respectively) $ 15,678 $ 20,309 Rooms 24,902 — Food and beverage 2,200 — Interest income ($ 2,600 and $ 2,514 with related parties, respectively) 7,216 7,029 Dividend income ($ 28,528 and $ 26,103 with related parties, respectively) 29,430 35,638 Other income 3,796 308 Total revenues 83,222 63,284 Expenses Property operating expenses ($ 260 and $ 0 with related parties, respectively) 22,255 7,489 Property management fees ($ 734 and $ 726 with related parties, respectively) 1,491 726 Real estate taxes and insurance 6,544 4,377 Advisory and administrative fees 14,165 11,740 Property general and administrative expenses ($ 271 and $ 222 with related parties, respectively) 7,405 4,250 Corporate general and administrative expenses 12,803 7,981 Conversion expenses — 1,203 Depreciation and amortization 15,600 13,937 Impairment loss 7,110 — Total expenses 87,373 51,703 Operating income (loss) ( 4,151 ) 11,581 Interest expense ( 28,352 ) ( 15,902 ) Equity in income (losses) of unconsolidated equity method ventures ($ 649 and $ 624 with related parties, respectively) 129 ( 306 ) Change in unrealized gains (losses) ($( 18,829 ) and $( 112,717 ) with related parties, respectively) ( 1,348 ) ( 108,249 ) Realized gains (losses) ($ 339 and $ 0 with related parties, respectively) ( 21,479 ) ( 1,634 ) Net income (loss) before income taxes ( 55,201 ) ( 114,510 ) Income tax expense ( 1,372 ) ( 2,731 ) Net loss ( 56,573 ) ( 117,241 ) Net (income) loss attributable to preferred shareholders ( 4,619 ) ( 4,619 ) Net (income) loss attributable to noncontrolling interests 9,843 — Net loss attributable to common shareholders $ ( 51,349 ) $ ( 121,860 ) Weighted average common shares outstanding - basic 40,229 37,334 Weighted average common shares outstanding - diluted 40,229 37,334 Loss per share - basic $ ( 1.28 ) $ ( 3.26 ) Loss per share - diluted $ ( 1.28 ) $ ( 3.26 ) See Notes to Consolidated Financial Statements 100 Table of Contents NEXPOINT DIVERSIFIED REAL ESTATE TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY (in thousands, except share and per share amounts) Series A Preferred Shares Common Shares Additional Paid-in Capital Accumulated Earnings (Loss) Noncontrolling Interests Total Year Ended December 31, 2024 Number of Shares Amount Number of Shares Amount Balances, December 31, 2023 3,359,593 $ 3 38,389,600 $ 38 $ 1,011,613 $ ( 126,580 ) $ — $ 885,074 Noncontrolling interests from NHT Acquisition — — — — — — 6,873 6,873 Stock-based compensation expense — — 145,433 — 2,808 — — 2,808 Shares issued to Adviser for admin and advisory fees — — 867,627 1 5,544 — — 5,545 Net loss attributable to common shareholders — — — — — ( 51,349 ) — ( 51,349 ) Net loss attributable to noncontrolling interests — — — — — — ( 9,843 ) ( 9,843 ) Net income attributable to Series A preferred shareholders — — — — — 4,619 — 4,619 Common share distributions declared ($ 0.60 per share) — — 3,276,909 4 19,315 ( 24,889 ) — ( 5,570 ) Series A preferred share distributions declared ($ 1.3750 per share) — — — — — ( 4,619 ) — ( 4,619 ) Balances, December 31, 2024 3,359,593 $ 3 42,679,569 $ 43 $ 1,039,280 $ ( 202,818 ) $ ( 2,970 ) $ 833,538 See Notes to Consolidated Financial Statements 101 Table of Contents NEXPOINT DIVERSIFIED REAL ESTATE TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY (in thousands, except share and per share amounts) Series A Preferred Shares Common Shares Additional Paid-in Capital Accumulated Earnings (Loss) Total Year Ended December 31, 2023 Number of Shares Amount Number of Shares Amount Balances, December 31, 2022 3,359,593 $ 3 37,171,807 $ 37 $ 999,845 $ 17,947 $ 1,017,832 Stock-based compensation expense — — — — 1,344 — 1,344 Shares issued to Adviser for admin and advisory fees — — 145,620 — 1,431 — 1,431 Net loss attributable to common shareholders — — — — — ( 121,860 ) ( 121,860 ) Net income attributable to preferred shareholders — — — — — 4,619 4,619 Common share distributions declared ($ 0.60 per share) — — 1,072,173 1 8,993 ( 22,667 ) ( 13,673 ) Series A preferred shares distributions declared ($ 1.3750 per share) — — — — — ( 4,619 ) ( 4,619 ) Balances, December 31, 2023 3,359,593 $ 3 38,389,600 $ 38 $ 1,011,613 $ ( 126,580 ) $ 885,074 See Notes to Consolidated Financial Statements 102 Table of Contents NEXPOINT DIVERSIFIED REAL ESTATE TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the Year Ended December 31, 2024 2023 Cash flows from operating activities Net loss $ ( 56,573 ) $ ( 117,241 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 15,600 13,937 Amortization of intangible lease assets and liabilities ( 1,018 ) ( 1,217 ) Amortization of deferred financing costs 696 776 Amortization of fair value adjustment of assumed debt 1,140 — Paid-in-kind interest ($( 5,845 ) and $( 1,893 ) with related parties, respectively) ( 10,089 ) ( 5,952 ) Proceeds from paid-in-kind interest 2,517 3,730 Net cash received on derivative settlements 932 — Realized loss 21,479 1,634 Net change in unrealized (gain) loss on investments held at fair value ($ 18,829 and $ 112,717 with related parties, respectively) 1,348 108,249 Unrealized (gain) loss on interest rate derivatives ( 27 ) — Impairment loss 7,110 — Equity in (income) losses of unconsolidated ventures ($( 649 ) and $ 624 with related parties, respectively) ( 129 ) 306 Distributions of earnings from unconsolidated ventures ($ 761 and $ 817 with related parties, respectively) 5,403 4,087 Stock-based compensation expense 3,010 1,344 Cash paid for life settlement premiums — ( 3,355 ) Equity security dividends reinvested ($( 5,459 ) and $( 5,529 ) with related parties, respectively) ( 5,476 ) ( 5,529 ) Deferred tax (benefit) expense 278 ( 648 ) Changes in operating assets and liabilities, net of effects of acquisitions: Income tax payable ( 101 ) ( 10,364 ) Real estate taxes payable ( 523 ) ( 23 ) Operating assets ( 3,246 ) ( 9,077 ) Operating liabilities 6,004 ( 4,923 ) Net cash used in operating activities ( 11,665 ) ( 24,266 ) Cash flows from investing activities Proceeds from asset redemptions ($ 19,136 and $ 4,000 with related parties, respectively) 22,701 13,759 Distributions from CLO investments 1,266 9,170 Proceeds from sale of investments 2,438 16,512 Net cash acquired in acquisition of NexPoint Hospitality Trust 42,749 — Purchases of investments ($( 34,787 ) and $( 5,984 ) with related parties, respectively) ( 34,907 ) ( 5,984 ) Additions to consolidated real estate investments ( 8,273 ) ( 10,474 ) Proceeds from life settlement policy maturities — 3,000 Cash outflow from deconsolidation of investment — ( 3,993 ) Net cash provided by investing activities 25,974 21,990 Cash flows from financing activities Proceeds received from notes payable — 39,000 Mortgage proceeds received ($ 9,900 and $ 0 with related parties, respectively) 9,900 — Mortgage payments ( 4,777 ) ( 2,364 ) Prime brokerage borrowing 341 11,919 Credit facilities payments ( 12,915 ) ( 10,000 ) Prime brokerage payments ( 901 ) ( 12,761 ) Deferred financing costs paid ( 463 ) ( 971 ) Payments for taxes related to net share settlement of stock-based compensation ( 202 ) — Distributions paid to Series A preferred shareholders ( 4,619 ) ( 4,619 ) Distributions paid to common shareholders ( 4,941 ) ( 13,408 ) Net cash provided by (used in) financing activities ( 18,577 ) 6,796 Net increase (decrease) in cash, cash equivalents and restricted cash ( 4,268 ) 4,520 Cash, cash equivalents and restricted cash, beginning of year 53,169 48,649 Cash, cash equivalents and restricted cash, end of year $ 48,901 $ 53,169 Supplemental Disclosure of Cash Flow Information Interest paid $ 19,886 $ 15,619 Income tax paid $ 2,640 $ 13,737 Supplemental Disclosure of Noncash Activities Non-cash distribution payment $ 19,319 $ 8,994 Fair value assets acquired from the sale of consolidated investments* $ — $ 68,500 Non-cash advisory fee payment $ 5,545 $ 1,431 Increase in dividends payable upon vesting of restricted stock units $ 628 $ 265 Real estate investments assumed in acquisition of NexPoint Hospitality Trust $ ( 167,624 ) $ — DST investments assumed in acquisition of NexPoint Hospitality Trust $ ( 5,000 ) $ — Interest rate caps assumed in acquisition of NexPoint Hospitality Trust $ ( 1,064 ) $ — Notes payable assumed in acquisition of NexPoint Hospitality Trust $ 50,694 $ — Mortgages payable assumed in acquisition of NexPoint Hospitality Trust $ 114,640 $ — Right of use assets assumed in acquisition of NexPoint Hospitality Trust $ ( 1,465 ) $ — Accrued interest payable assumed in acquisition of NexPoint Hospitality Trust $ 6,353 $ — Noncontrolling interests assumed in acquisition of NexPoint Hospitality Trust $ 6,873 $ — Deconsolidated investments at fair value from the acquisition of NexPoint Hospitality Trust $ 24,981 $ — Accounts receivable and other assets assumed in acquisition of NexPoint Hospitality Trust $ ( 1,305 ) $ — Prepaid assets and other assets assumed in acquisition of NexPoint Hospitality Trust $ ( 1,492 ) $ — Accounts payable and other liabilities assumed in acquisition of NexPoint Hospitality Trust $ 14,276 $ — Real estate taxes payable assumed in acquisition of NexPoint Hospitality Trust $ 1,233 $ — Change in capitalized construction costs included in accounts payable and other accrued liabilities $ 698 $ 723 Adjustment to Life Insurance Policies, at fair value, on deconsolidation of entity $ — $ ( 62,484 ) Adjustment to accounts receivable on deconsolidation of entity $ — $ ( 2,023 ) * For more information about this transaction, refer to Note 11. Life Settlement Portfolio See Notes to Consolidated Financial Statements 103 Table of Contents NEXPOINT DIVERSIFIED REAL ESTATE TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Description of Business NexPoint Diversified Real Estate Trust (the "Company", "we", "us", or "our") was formed in Delaware and has elected to be taxed as a real estate investment trust (a “REIT”). Substantially all of the Company’s business is conducted through NexPoint Diversified Real Estate Trust Operating Partnership, L.P. (the "OP"), the Company’s operating partnership. The Company conducts its business (the "Portfolio") through the OP and its wholly owned taxable REIT subsidiaries ("TRSs"). The Company's wholly owned subsidiary, NexPoint Diversified Real Estate Trust OP GP, LLC (the "OP GP"), is the sole general partner of the OP. As of December 31, 2024, there were 2,000 partnership units of the OP (the “OP Units”) outstanding, of which 100.0 % were owned by the Company. On July 1, 2022 (the “Deregistration Date”), the Securities and Exchange Commission (the “SEC”) issued an order pursuant to Section 8(f) of the Investment Company Act of 1940 (the “Investment Company Act”) declaring that the Company has ceased to be an investment company under the Investment Company Act (the “Deregistration Order”). The issuance of the Deregistration Order enabled the Company to proceed with full implementation of its new business mandate to operate as a diversified REIT that focuses primarily on investing in various commercial real estate property types and across the capital structure, including but not limited to equity, mortgage debt, mezzanine debt and preferred equity (the “Business Change”). The Company is externally managed by NexPoint Real Estate Advisors X, L.P. (the “Adviser”), through an agreement dated July 1, 2022, amended on October 25, 2022, April 11, 2023 and July 22, 2024 (the “Advisory Agreement”), by and among the Company and the Adviser for an initial three-year term that will expire on July 1, 2025 and successive one-year terms thereafter unless earlier terminated. The Adviser manages the day-to-day operations of the Company and provides investment management services. The Company had no employees as of December 31, 2024 . All of the Company’s investment decisions are made by the Adviser, subject to general oversight by the Adviser’s investment committee and our board of trustees (the “Board”). The Adviser is wholly owned by NexPoint Advisors, L.P. (the “Sponsor” or “NexPoint”). As a diversified REIT, the Company’s primary investment objective is to provide both current income and capital appreciation. The Company seeks to achieve this objective through the Business Change. Target underlying property types primarily include, but are not limited to, single-family rentals, multifamily, self-storage, life science, office, industrial, hospitality, net lease and retail. The Company may, to a limited extent, hold, acquire or transact in certain non-real estate securities. 2. Asset Acquisition NHT Acquisition On April 10, 2024, NexPoint Real Estate Partners, LLC (“NREP”), an entity advised by an affiliate of the Adviser, and Highland Capital Management, L.P. (“Highland”), a third party, entered into a Purchase Agreement ("Purchase Agreement") whereby Highland agreed to sell, among other things, 2,176,257 NHT Units to NREP. The Purchase Agreement was funded in part by cash of $ 0.8 million provided to NREP by the Company that was allocated for the sale of the NHT Units. Then on April 19, 2024, the Company, NexPoint Real Estate Opportunities, LLC ("NREO"), a wholly owned subsidiary of the Company, and NREP entered into an Assignment of Interests Agreement whereby NREP distributed, assigned, conveyed, transferred, set over, and delivered to NREO its right to purchase the NHT Units under the Purchase Agreement and all of its rights, title and interest in, to and under the NHT Units, including all voting, consent and financial rights, free and clear of all liens and encumbrances (the “NHT Acquisition”). As a result, the Company owned 53.65 % of the outstanding NHT Units and was determined to hold the controlling financial interest in NHT and as a result consolidated NHT. The NHT Acquisition was accounted for as an asset acquisition under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 805, Business Combinations . Because the Company did not wholly own NHT following the NHT Acquisition, the Company recognized a noncontrolling interest (“NCI”) of $ 6.9 million, which was recorded at fair value when the controlling financial interest was acquired. The Company also recorded an unrealized gain on its previously held interest in NHT of $ 3.9 million. On November 22, 2024, the Company announced that it had entered into an Agreement and Plan of Merger pursuant to which it would acquire the remaining outstanding NHT Units in a merger transaction (the “NHT Merger”) for 104 Table of Contents approximately $ 5.7 million, to be paid principally in common shares of the Company, with limited partnership interests of the OP paid for the equity interests of NHT Operating Partnership, LLC (“NHT OP”). On February 21, 2025, NHT’s unitholders voted to approve the NHT Merger. The NHT Merger is expected to close in the second quarter of 2025. The accumulated cost of the acquisition was allocated to the acquired assets and liabilities based on their relative fair values as follows (in thousands): Description Land $ 22,673 Buildings and improvements 128,616 Construction in progress 3,613 Furniture, fixtures, and equipment 12,722 Investments, at fair value 5,000 Cash and cash equivalents 38,467 Restricted cash 5,065 Prepaid and other assets 4,001 Right-of-use asset 1,465 Interest-rate cap 1,064 Mortgages payable ( 114,640 ) Notes payable ( 70,529 ) Accounts payable and other accrued liabilities ( 21,826 ) Accrued real estate taxes ( 1,233 ) Identifiable Net Assets Acquired $ 14,458 3. Summary of Significant Accounting Policies Basis of Accounting The accompanying consolidated financial statements are presented in accordance with U.S. generally accepted accounting principles (“GAAP”). GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the dates of the consolidated financial statements and the amounts of revenues and expenses during the reporting periods. Actual amounts realized or paid could differ from those estimates. All significant intercompany accounts and transactions have been eliminated in consolidation. The accompanying consolidated financial statements have been prepared according to the rules and regulations of the SEC. In the opinion of management, all adjustments and eliminations necessary for the fair presentation of the Company’s financial position as of December 31, 2024 and December 31, 2023, and results of operations for the years ended December 31, 2024 and 2023 have been included. Such adjustments are normal and recurring in nature. Principles of Consolidation Upon the application for the historical cost accounting basis, the Company accounts for partnerships, joint ventures and other similar entities in which it holds an ownership interest in accordance with FASB ASC 810, Consolidation . The Company first evaluates whether each entity is a variable interest entity (“VIE”). Under the VIE model, the Company consolidates an entity when it has control to direct the activities of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. Under the voting model, the Company consolidates an entity when it controls the entity through ownership of a majority voting interest. The consolidated financial statements include the accounts of the Company and its subsidiaries, including the OP and its subsidiaries. The Company’s sole significant asset is its investment in the OP, and consequently, substantially all of the Company’s assets and liabilities represent those assets and liabilities of the OP. 105 Table of Contents Income Taxes I. U.S REIT Status The Company elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code"), and expects to continue to qualify as a REIT. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement to distribute annually at least 90% of its “REIT taxable income,” as defined by the Code, to its shareholders. As a REIT, the Company will be subject to federal income tax on its undistributed REIT taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which distributions it pays with respect to any calendar year are less than the sum of (1) 85% of its ordinary income, (2) 95% of its capital gain net income and (3) 100% of its undistributed income from prior years. The Company intends to operate in such a manner so as to qualify as a REIT, but no assurance can be given that the Company will operate in a manner so as to qualify as a REIT. Taxable income from certain non-REIT activities is managed through a TRS and is subject to applicable federal, state, and local income and margin taxes. If the Company fails to meet these requirements, it could be subject to federal income tax on all of the Company’s taxable income at regular corporate rates for that year. The Company would not be able to deduct distributions paid to shareholders in any year in which it fails to qualify as a REIT. Additionally, the Company will also be disqualified from electing to be taxed as a REIT for the four taxable years following the year during which qualification was lost unless the Company is entitled to relief under specific statutory provisions. As of December 31, 2024, the Company believes it is in compliance with all applicable REIT requirements. As a REIT for U.S. federal income tax purposes, the Company may deduct earnings distributed to shareholders against the income generated by our REIT operations. The Company continues to be subject to income taxes on the income of its taxable REIT subsidiaries. A reconciliation of the deferred tax asset (liability) for the periods indicated is as follows (in thousands): As of December 31, 2024 2023 NHF TRS NREO TRS NHT TRSs Combined NHF TRS NREO TRS Combined Deferred Tax Assets $ 14,942 $ 290 $ 6,561 $ 21,793 $ 19,384 $ 441 $ 19,825 Valuation Allowance ( 10,487 ) — ( 6,535 ) ( 17,022 ) ( 14,896 ) — ( 14,896 ) Deferred Tax Liability — ( 2,127 ) ( 26 ) ( 2,153 ) — ( 2,033 ) ( 2,033 ) Deferred Tax Asset (Liability), net of Valuation Allowance $ 4,455 $ ( 1,837 ) $ — $ 2,618 $ 4,488 $ ( 1,592 ) $ 2,896 The Company’s tax provision for annual periods is determined using an estimate of its annual current and deferred effective tax rates, adjusted for discrete items. Our effective tax rates for the year ended December 31, 2024 and 2023 were ( 2.49 )% and ( 2.38 )%, respectively. Our effective tax rate differs from the U.S. federal statutory corporate tax rate of 21.0% primarily due to our REIT operations generally not being subject to federal income taxes. The Company recognizes its tax positions and evaluates them using a two-step process. First, the Company determines whether a tax position is more-likely-than-not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Second, the Company will determine the amount of benefit to recognize and record the amount that is more likely than not to be realized upon ultimate settlement. The Company had no material unrecognized tax benefit or expense, accrued interest or penalties as of December 31, 2024 and 2023. The Company and its subsidiaries are subject to federal income tax as well as income tax of various state and local jurisdictions. The 2023, 2022 and 2021 tax years remain open to examination by tax jurisdictions to which the Company and its subsidiaries are subject. When applicable, the Company recognizes interest and/or penalties related to uncertain tax positions on its Consolidated Statement of Operations and Comprehensive Income (Loss). The Company has not recorded any uncertain tax positions for the years ended December 31, 2024 and 2023. 106 Table of Contents A reconciliation of the statutory income tax provisions to the effective income tax provisions for the periods indicated is as follows (in thousands): For the Year Ended December 31, 2024 2023 Expected tax at statutory rate $ ( 11,592 ) 21.0 % $ ( 24,047 ) 21.0 % Non-taxable REIT income 10,838 - 19.6 % 27,426 - 24.0 % Change in valuation allowance 2,126 - 3.9 % ( 648 ) 0.6 % Total provision $ 1,372 - 2.5 % $ 2,731 - 2.4 % II. Canadian mutual fund status NHT is a mutual fund trust pursuant to the Income Tax Act (Canada) (the “Tax Act”). Under current tax legislation, a mutual fund trust that is not a specified investment flow-through trust (“SIFT”) pursuant to the Tax Act generally is entitled to deduct distributions of taxable income such that it is not liable to pay Canadian income taxes provided that its taxable income is fully distributed to unitholders. NHT intends to qualify as a mutual fund trust that is not a SIFT and to make distributions not less than the amount necessary to ensure that NHT will not be liable to pay Canadian income taxes. Deferred Tax Assets As of December 31, 2024, significant components of the net deferred tax assets (“DTA”) of the Company’s TRSs were as follows (in thousands): Deferred Tax Asset as of December 31, 2024 Deferred Tax Asset as of December 31, 2023 Capital loss carryover from prior year $ 137 $ 137 Capital loss carryover to be utilized in current year — — Net operating loss carryover from prior year 298 442 Net operating loss carryover to be utilized in current year ( 145 ) ( 138 ) Unrealized tax loss on investments 21,503 19,384 Total deferred tax assets $ 21,793 $ 19,825 Valuation allowance ( 17,022 ) ( 14,896 ) Deferred tax liability ( 2,153 ) ( 2,033 ) Net deferred tax asset $ 2,618 $ 2,896 The Company may not offset tax assets or liabilities from one TRS with those of another TRS. NHF TRS, LLC, one of the Company's TRSs, is estimated to generate a net taxable capital loss of $ 7.9 million for the year ended December 31, 2024 and generated a net taxable capital gain of $ 10.9 million for the year ended December 31, 2023. The Company believes it is more likely than not that it will be able to harvest capital losses within this TRS during the three succeeding taxable years to be eligible for a capital loss carryback refund claim and has therefore not applied a valuation allowance to the extent of the expected future refund claim. As such, the Company has recorded a valuation allowance of $ 10.5 million and $ 14.9 million as of December 31, 2024 and 2023, respectively, against the Company’s gross deferred tax assets to arrive at a net DTA of $ 4.5 million and $ 4.5 million as of December 31, 2024 and 2023, respectively, to reflect the expected tax benefit associated with the unrealized tax losses at this TRS. NREO TRS, LLC ("NREO TRS") has an estimated net operating loss balance of $ 0.7 million as of December 31, 2024 that does not have an expiration date as well as an estimated $ 0.7 million capital loss balance as of December 31, 2024 that will expire if not utilized within the succeeding three taxable years. The Company believes that it will be able to fully utilize the tax assets from NREO TRS and has not therefore applied a valuation allowance to the $ 0.3 million DTA generated by this TRS. NREO TRS, one of the Company's TRSs, had an estimated net operating loss balance of $ 1.4 million as of December 31, 2023 that does not have an expiration date as well as an estimated $ 0.7 million capital loss balance as of December 31, 2023, that will expire if not utilized within the succeeding four taxable years. 107 Table of Contents Cash, Cash Equivalents and Restricted Cash The Company considers all highly liquid investments purchased with an original maturity of six months or less to be cash equivalents. Cash and cash equivalents are stated at cost, which approximates fair value. Substantially all amounts on deposit with major financial institutions exceed insured limits. Restricted cash represents cash deposited in accounts related to security deposits, property taxes, insurance premiums and deductibles and other lender-required escrows. Amounts deposited in the reserve accounts associated with the loans can only be used as provided for in the respective loan agreements, and security deposits held pursuant to lease agreements are required to be segregated. Income Recognition Rental Income – The Company has made several investments in direct real estate. The primary operations of these direct real estate investments consist of rental income earned from its tenants under lease agreements. Rental income is recognized on the straight-line method over the related terms of the leases. Tenant and resident reimbursements and other income consist of charges billed to tenants for utilities, administrative, application and other fees and are recognized when earned which is included in rental income in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss). Interest Income – Debt investments where the Company expects to collect the contractual interest and principal payments are considered to be performing. The Company recognizes income on performing debt investments in accordance with the terms of the investment on an accrual basis. Interest income also includes amortization of loan premiums or discounts and loan origination costs and prepayment penalties. Dividend Income – Dividends and other corporate actions are recorded on the ex-dividend date except for certain foreign corporate actions, which are recorded as soon after ex-dividend date as such information becomes available and is verified. Realized Gain (Loss) on Investments - The Company recognizes the excess, or deficiency, of net proceeds received, less the carrying value of such investments, as realized gains or losses, respectively. The Company reverses cumulative, unrealized gains or losses previously reported in its Consolidated Statement of Operations with respect to the investment sold at the time of the sale. Unrealized Gain (Loss) on Investments – Unrealized gains and losses represent changes in fair value for equity method investments, CLO equity investments, bonds, common stock, convertible notes, LLC interests, LP interests, rights and warrants, and senior loans for which the fair value option has been elected. Hotel Revenue Recognition The Company generally recognizes revenue in accordance with ASC 606, Revenue From Contracts with Customers , which requires five steps to evaluate revenue recognition: (i) identify the contract(s) with a customer; (ii) identity the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. Rooms revenue is recognized over the length of a customer’s hotel stay. Food and beverage (“F&B”) revenue generally consists of goods and ancillary service charges the customer separately chooses to purchase and are recognized generally when the goods or services are provided to the customer. Expense Recognition Interest expense - Interest expense in accordance with the Company’s financing agreements, is recorded on the accrual basis. Property operating expenses - Property operating expenses include property maintenance costs, salary and employee benefit costs, utilities, casualty-related expenses and recoveries and other property operating costs. 108 Table of Contents Property management fees - Property management fees include fees paid to NexVest, our property manager, for managing each property directly or indirectly owned by us (see Note 14 to our consolidated financial statements) and other property managers for managing the day-to-day operations of our hotels. Real estate taxes and insurance - Real estate taxes include the property taxes assessed by local and state authorities depending on the location of each property. Insurance includes the cost of commercial, general liability, and other needed insurance for each property. Advisory and administrative fees - Advisory and administrative fees include the fees paid to our Adviser pursuant to the Advisory Agreement (see Note 14). Property general and administrative expense - Property general and administrative expenses include the costs of marketing, professional fees, general office supplies, and other administrative related costs of each property. Corporate general and administrative expenses - Corporate general and administrative expenses include, but are not limited to, audit fees, legal fees, listing fees, board of director fees, equity-based compensation expense, investor relations costs and payments of reimbursements to our Adviser for operating expenses. Corporate general and administrative expenses and the advisory and administrative fees paid to our Adviser will not exceed 1.5% of Managed Assets (as defined below) per calendar year (or part thereof that the Advisory Agreement is in effect), calculated in accordance with the Advisory Agreement, or the Expense Cap (as defined below). This limitation ended on June 30, 2023 and did not limit the reimbursement by us of expenses related to securities offerings paid by our Adviser. The Expense Cap also does not apply to legal, accounting, financial, due diligence, and other service fees incurred in connection with mergers and acquisitions, extraordinary litigation, or other events outside our ordinary course of business or any out-of-pocket acquisition or due diligence expenses incurred in connection with the acquisition or disposition of real estate assets. Additionally, in the sole discretion of the Adviser, the Adviser may elect to waive certain advisory and administrative fees otherwise due. If advisory and administrative fees are waived in a period, the waived fees for that period are considered to be waived permanently and the Adviser may not be reimbursed in the future. Conversion expense - Conversion expenses include the costs of the Business Change in conjunction with the Deregistration Order, which primarily include legal fees and other fees in preparation of the conversion. Depreciation and amortization - Depreciation and amortization costs primarily include depreciation of our properties and amortization of leases or expenses. Investments The Company holds investments in publicly traded companies and privately held entities primarily involved in the life science, multifamily, self-storage, single-family rental, mortgage lending, and hospitality industries. Each investment is evaluated to determine whether the Company has the ability to exercise significant influence, but not control, over an investee. Investments are evaluated in which Company ownership is equal to or greater than 20%, but less than or equal to 50%, of an investee’s voting stock with a presumption that the Company has this ability. For our investments in limited partnerships and functional equivalents that maintain specific ownership accounts, we presume that such ability exists when our ownership interest exceeds 3% to 5%. In addition to the Company’s ownership interest, the Company also considers whether it has a board seat or whether it participates in the policy-making process, among other criteria, to determine if we have an ability to exert significant influence, but not control, over an investee. If we determine that we have such ability, but we do not control, we account for the investment under the equity method of accounting, as described below. Investments that qualify for the equity method of accounting – Under the equity method of accounting, the Company initially recognizes its investment at cost and subsequently adjusts the carrying amount of the investments for its share of earnings and losses reported by the investee, distributions received, and other-than-temporary impairments. The Company has elected the fair value option for several of its investments that would otherwise be accounted for under the equity method (See Note 8). Distributions from these investments are accounted for as Interest and Dividend income and mark-to-market gains and losses are included in Change in Unrealized Gains/(Losses) on the consolidated Statement of Operations. For more information about the Company’s investments accounted for under the equity method, refer to Note 8 – Equity Method Investments. The Company has elected for certain of the equity method investments to be measured using fair value. Summarized financial information for significant equity method investments, as determined in accordance with Rule 8-03(b)(3) of Regulation S-X, for which results are not available on a timely basis, are reported on a three-month lag. 109 Table of Contents Investments that do not qualify for the equity method of accounting – For investees over which we determine that we do not have the ability to exercise significant influence or control, we account for each investment depending on whether it is an investment in a (i) publicly traded company, (ii) privately held entity that reports net asset value (“NAV”) per share, or (iii) privately held entity that does not report NAV per share, as described below. Investments in publicly traded companies – Our investments in publicly traded companies are classified as investments with readily determinable fair values and are presented at fair value in our consolidated balance sheets, with changes in fair value classified in change in unrealized gain (loss) in our Consolidated Statement of Operations. The fair values of our investments in publicly traded companies are determined based on sales prices or quotes available on securities exchanges. Investments in privately held companies – Our investments in privately held entities without readily determinable fair values consist of (i) investments in privately held entities that report NAV per share and (ii) investments in privately held entities that do not report NAV per share. These investments are accounted for as follows: Investments in privately held entities that report NAV per share – Investments in privately held entities that elect the fair value option that report NAV per share, such as our privately held investments in limited partnerships, are presented at fair value using NAV, with changes in fair value recognized in net income. We use NAV per share reported by limited partnerships generally without adjustment, unless we are aware of information indicating that the NAV reported by a limited partnership does not accurately reflect the fair value of the investment at our reporting date. Investments in privately held entities that do not report NAV per share – Investments in privately held entities that do not report NAV per share are accounted for using a valuation technique described further in Note 9 - Fair Value of Financial Instruments. Impairment evaluation of equity method investments – We monitor equity method investments not reported at fair value for indicators that a decrease in the value of the investment has occurred that is other than temporary. If such indicators are present, we are required to estimate the investment’s fair value and immediately recognize an impairment charge in an amount equal to the investment’s carrying value in excess of its estimated fair value. Fair Value Measurements Fair value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability. As a basis for considering market participant assumptions in fair value measurements, FASB ASC 820, Fair Value Measurement and Disclosures establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy): • Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. • Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates and yield curves that are observable at commonly quoted intervals. • Level 3 inputs are the unobservable inputs for the asset or liability, which are typically based on an entity’s own assumption, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on input from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The Company utilizes independent third parties to perform the allocation of value analysis for each property acquisition and to perform the market valuations on its derivative financial instruments and has established policies, as described above, processes and procedures intended to ensure that the valuation methodologies for investments and derivative financial instruments are fair and consistent as of the measurement date. 110 Table of Contents Valuation of Investments As of December 31, 2024 and 2023 , the Company’s fair valued investments consisted of senior loans, corporate bonds, collateralized loan obligations ("CLOs"), convertible notes, common stocks, rights, warrants, LP interests and LLC interests. The fair value of the Company’s senior loans, bonds, and CLOs are generally based on quotes received from brokers or independent pricing services. Senior loans, bonds, and CLOs with quotes that are based on actual trades with a sufficient level of activity on or near the measurement date are classified as Level 2 assets. Senior loans, bonds, and CLOs that are priced using quotes derived from implied values, indicative bids, or a limited number of actual trades are classified as Level 3 assets because the inputs used by the brokers and pricing services to derive the values are not readily observable. The Company has elected for certain of the equity method investments to be measured using fair value. The Company has elected for all debt instruments to be measured using fair value. The fair value of the Company’s common stocks, rights, and warrants that are not actively traded on national exchanges are generally priced using quotes derived from implied values, indicative bids, or a limited amount of actual trades and are classified as Level 3 assets because the inputs used by the brokers and pricing services to derive the values are not readily observable. At the end of each calendar quarter, the Adviser evaluates the Level 2 and 3 assets and liabilities for changes in liquidity, including but not limited to: whether a broker is willing to execute at the quoted price, the depth and consistency of prices from third party services, and the existence of contemporaneous, observable trades in the market. Additionally, the Adviser evaluates the Level 1 and 2 assets and liabilities on a quarterly basis for changes in listings or delistings on national exchanges. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Additionally, the fair value of investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values the Company may ultimately realize. Further, such investments may be subject to legal and other restrictions on resale or otherwise be less liquid than publicly traded securities. The fair value of the Company’s investments in common stock, exchange-traded funds, other registered investment companies and warrants that are not actively traded on national exchanges are generally priced using quotes derived from implied values, indicative bids, or a limited amount of actual trades and are classified as Level 3 assets because the inputs used by the brokers and pricing services to derive the values are not readily observable. The Company’s real estate investments include equity interests in limited liability companies and equity issued by REITs that invest in commercial real estate. The fair value of real estate investments that are not actively traded on national exchanges are based on internal models developed by the Adviser. The significant inputs to the models include cash flow projections for the underlying properties, capitalization rates and appraisals performed by independent valuation firms. These inputs are not readily observable, and the Company has classified the investments as Level 3 assets. Exchange-traded options are valued based on the last trade price on the primary exchange on which they trade. If an option does not trade, the mid-price, which is the mean of the bid and ask price, is utilized to value the option. The fair value of the Company’s convertible notes are categorized as Level 3 assets in the fair value hierarchy. Convertible notes are valued using a discounted cash flow model using discount rates derived from observable market data applied to the internal rate of return implied by the expected contractual cash flows. Distributions from equity method investments We use the “nature of the distribution” approach to determine the classification within our consolidated statements of cash flows of cash distributions received from equity method investments, including our unconsolidated real estate joint ventures and equity method non-real estate investments. Under this approach, distributions are classified based on the nature of the underlying activity that generated the cash distributions. Under the cumulative earnings approach, distributions up to the amount of cumulative equity in earnings recognized are classified as cash inflows from operating activities, and those in excess of that amount are classified as cash inflows from investing activities. Leases The Company’s leasing activities are accounted for under ASC 842, Leases , if an identified contract is, or contains, a lease. Lessors classify leases as either sales-type, direct financing or operating leases. A lease is classified as a sales-type lease if at least one of the following criteria is met: (1) the lease transfers ownership of the underlying asset to the lessee, (2) the lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise, (3) 111 Table of Contents the lease term is for a major part of the remaining economic life of the underlying asset, (4) the present value of the sum of the lease payments equals or exceeds substantially all of the fair value of the underlying assets, or (5) the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. If none of the above criteria is met, a lease is classified as a direct financing lease if both of the following criteria are met: (1) the present value of the of the sum of the lease payments and any residual value guaranteed by the lessee that is not already reflected in the lease payments equals or exceeds substantially all of the underlying asset’s fair value and (2) it is probable that the lessor will collect the lease payments plus any amount necessary to satisfy a residual value guarantee. A lease is classified as an operating lease if it does not qualify as a sales-type or direct financing lease. All of the leasing arrangements where the Company is the lessor are classified as operating leases. Lessees classify leases as either finance or operating leases. A lease is classified as a finance lease if at least one of the following criteria is met: (1) the lease transfers ownership of the underlying asset to the lessee, (2) the lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise, (3) the lease term is for a major part of the remaining economic life of the underlying asset, (4) the present value of the sum of the lease payments equals or exceeds substantially all of the fair value of the underlying asset, or (5) the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. A lease is classified as an operating lease if none of the five criteria described above for finance lease classification is met. The Company has one finance lease related to the Bradenton Hampton Inn & Suites, and one operating lease related to HUB Research Triangle Park, which are included in “Right-of-use assets” on the Consolidated Balance Sheets. Purchase Price Allocation Upon acquisition of a property considered to be an asset acquisition, the purchase price and related acquisition costs (“total consideration”) are allocated to land, buildings, improvements, furniture, fixtures, and equipment, and intangible lease assets and liabilities in accordance with FASB ASC 805, Business Combinations. The allocation of total consideration, which is determined using inputs that are classified within Level 3 of the fair value hierarchy established by FASB ASC 820, Fair Value Measurement and Disclosures (“ASC 820”) (see Note 9), is based on management’s estimate of the property’s “as-if” vacant fair value and is calculated by using all available information such as the replacement cost of such asset, appraisals, property condition reports, market data and other related information. If any debt is assumed in an acquisition, the difference between the fair value, which is estimated using inputs that are classified within Level 2 of the fair value hierarchy, and the face value of debt is recorded as a premium or discount and amortized as interest expense over the life of the debt assumed. Operating Real Estate Investments Real estate assets, including land, buildings, improvements, furniture, fixtures and equipment, and intangible lease assets are stated at historical cost less accumulated depreciation and amortization. Costs incurred in making repairs and maintaining real estate assets are expensed as incurred. Expenditures for improvements, renovations, and replacements are capitalized at cost. Real estate-related depreciation and amortization are computed on a straight-line basis generally over the estimated useful lives as described in the following table: Years Land Not depreciated Buildings 30 - 40 Improvements 3 - 20 Furniture, fixtures, and equipment 3 - 7 Intangible lease assets and liabilities Over lease term Construction in progress includes the cost of renovation projects being performed at the various properties. Once a project is complete, the historical cost of the renovation is placed into service in one of the categories above depending on the type of renovation project and is depreciated over the estimated useful lives as described in the table above. 112 Table of Contents Impairment Real estate assets held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The key inputs into our impairment analysis include, but are not limited to, the holding period, net operating income, and capitalization rates. In such cases, we will evaluate the recoverability of such real estate assets based on estimated future cash flows and the estimated liquidation value of such real estate assets, and provide for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the real estate asset. If impaired, the real estate asset will be written down to its estimated fair value. The Company’s impairment analysis identifies and evaluates events or changes in circumstances that indicate the carrying amount of a real estate investment may not be recoverable, including determining the period the Company will hold the rental property, net operating income, and the estimated capitalization rate for each respective real estate investment. For the year ended December 31, 2024, the Company recorded approximately $ 5.2 million of impairment loss on real estate held and used, which is included in impairment loss on the Consolidated Statements of Operations and Comprehensive Income (Loss). The Company did not record any impairment charges for the year ended December 31, 2023. Held for Sale The Company periodically classifies real estate assets as held for sale when certain criteria are met in accordance with GAAP. At that time, the Company presents the net real estate assets and the liabilities associated with the real estate held for sale separately in its consolidated balance sheet, and the Company ceases recording depreciation and amortization expense related to that property. Real estate held for sale is reported at the lower of its carrying amount or its estimated fair value less estimated costs to sell. As of December 31, 2024 and December 31, 2023, there were three and zero properties classified as held for sale, respectively. In addition to the net real estate assets, the consolidated balance sheets also includes approximately $ 0.1 million and $ 0 million of accounts receivable and prepaid and other assets, and approximately $ 0.8 million and $ 0 million of accounts payable, real estate taxes payable, security deposits, prepaid rents, and other accrued liabilities related to assets held for sale as of December 31, 2024 and December 31, 2023, respectively. For the year ended December 31, 2024, the Company recorded approximately $ 1.9 million of losses on real estate held for sale, which are included in impairment loss on the Consolidated Statements of Operations and Comprehensive Income (Loss). The Company did not record any losses for the year ended December 31, 2023. Segment Reporting We adopted ASU 2023-07, Segment Reporting – Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires a public entity to disclose significant segment expenses and other segment items in interim and annual periods and expands the GAAP disclosure requirements for interim periods. The ASU 2023-07 also explicitly requires public entities with a single reportable segment to provide all segment disclosures under GAAP. The Company identifies and discloses its reporting segment(s) in accordance with ASC 280, Segment Reporting. In applying this guidance, the Company first identifies its operating segment(s) from the component(s) where: (1) it engages in business activities from which it may recognize revenue and incur expenses, (2) its operating results are regularly reviewed by the chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and (3) its discrete financial information is available. Reportable segments are generally those operating segments that meet certain quantitative thresholds. The Company has determined it has two reportable segments: NXDT and NHT. Recent Accounting Pronouncements In March 2024, the FASB issued ASU 2024-01, Compensation-Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards (“ASU 2024-01”), to clarify the scope application of profits interest and similar awards by adding illustrative guidance in ASC 718, Compensation-Stock Compensation ("ASC 718"). ASU 2024-01 clarifies how to determine whether profits interest and similar awards should be accounted for as a share-based payment arrangement (ASC 718) or as a cash bonus or profit-sharing arrangement (ASC 710, Compensation-General, or other guidance) and applies to all reporting entities that account for profits interest awards as compensation to employees or non-employees. In addition to adding the illustrative guidance, ASU 2024-01 modified the language in paragraph 718-10-15-3 to improve its clarity and operability without changing the guidance. ASU 2024-01 is effective for fiscal years beginning after December 15, 2024, including interim periods within those annual periods. Early adoption is permitted. The amendments should be applied either retrospectively to all prior periods presented in the financial statements, or prospectively to profits interests and similar awards granted or modified on or after the adoption date. The Company is currently assessing the impacts of adopting ASU 2024-01 on its consolidated financial statements and disclosures. 113 Table of Contents In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (“ASU 2024-03”). ASU 2024-03 requires disclosures of disaggregated information about certain income statement expense line items on an annual and interim basis. The amendments are effective for fiscal years beginning after December 15, 2026, with early adoption permitted, and should be applied prospectively, with the option to apply retrospectively. The Company is currently evaluating the impact of adopting the amendments on its disclosures. 4. Investments in Real Estate Subsidiaries The Company conducts its operations through the OP and NHT OP, which collectively own several real estate properties through single asset limited liability companies that are special purpose entities (“SPEs”). The Company consolidates the SPEs that it controls as well as any VIEs where it is the primary beneficiary. All of the properties the SPEs own are consolidated in the Company’s consolidated financial statements. The assets of each entity can only be used to settle obligations of that particular entity, and the creditors of each entity have no recourse to the assets of other entities or the Company. As of December 31, 2024, the Company, through the OP, owned eleven properties through SPEs, including four in the NXDT segment, and seven in the NHT segment. The following table represents the Company’s ownership in each property by virtue of its consolidation of the SPEs that directly own the title to each property as of December 31, 2024 and December 31, 2023: Effective Ownership Percentage at Property Name Location Year Acquired December 31, 2024 December 31, 2023 White Rock Center Dallas, Texas 2013 100 % 100 % 5916 W Loop 289 Lubbock, Texas 2013 100 % 100 % Cityplace Dallas, Texas 2018 100 % 100 % NexPoint Dominion Land, LLC (1) Plano, Texas 2022 100 % 100 % Dallas Hilton Garden Inn (2) Dallas, Texas 2014 (3) 54 % N/A Addison Property (2) (4) Addison, Texas 2017 (3) 54 % N/A Plano Homewood Suites (2) (4) Plano, Texas 2017 (3) 54 % N/A Las Colinas Homewood Suites (2) (4) Las Colinas, Texas 2017 (3) 54 % N/A St. Petersburg Marriott (2) St. Petersburg, Florida 2018 (3) 54 % N/A Hyatt Place Park City (2) Park City, Utah 2022 (3) 54 % N/A Bradenton Hampton Inn & Suites (2) Bradenton, Florida 2022 (3) 54 % N/A (1) NexPoint Dominion Land, LLC owns 100 % of 21.5 acres of undeveloped land in Plano, Texas. (2) NHT owns 100 % of the properties, and NXDT owns approximately 54 % of NHT. (3) Reflects the date NHT or its predecessor acquired the property. (4) Property classified as held for sale as of December 31, 2024. 114 Table of Contents 5. Consolidated Real Estate Investments As of December 31, 2024, the major components of the Company’s investments in real estate held by SPEs the Company consolidates, which are included in "Consolidated Real Estate Investments" on the Consolidated Balance Sheet, were as follows (in thousands): Operating Properties Land Buildings and Improvements Intangible Lease Assets Intangible Lease Liabilities Right of use assets Construction in Progress Furniture, Fixtures, and Equipment Totals White Rock Center $ 1,315 $ 10,568 $ 1,921 $ ( 101 ) $ — $ — $ 13 $ 13,716 5916 W Loop 289 1,081 2,938 — — — — — 4,019 Cityplace Tower 18,812 195,408 9,058 ( 6,669 ) — 19,053 356 236,018 NexPoint Dominion Land, LLC 26,500 — — — — — — 26,500 Dallas Hilton Garden Inn 4,116 24,631 — — — 96 1,475 30,318 St. Petersburg Marriott 5,829 33,715 — — — 3,951 2,301 45,796 Hyatt Place Park City 3,737 19,876 — — — 877 3,146 27,636 Bradenton Hampton Inn & Suites 837 25,064 — — 1,465 712 2,833 30,911 HUB Research Triangle Park — — — — 711 — — 711 Accumulated depreciation and amortization — ( 25,230 ) ( 8,353 ) 3,631 ( 29 ) — ( 1,390 ) ( 31,371 ) Total Operating Properties $ 62,227 $ 286,970 $ 2,626 $ ( 3,139 ) $ 2,147 $ 24,689 $ 8,734 $ 384,254 Held for Sale Properties Plano Homewood Suites $ 2,106 $ 5,394 $ — $ — $ — $ 28 $ 738 $ 8,266 Las Colinas Homewood Suites 2,292 10,153 — — — 313 1,004 13,762 Addison Property 2,351 4,577 — — — 518 804 8,250 Accumulated depreciation and amortization — ( 218 ) — — — — ( 170 ) ( 388 ) Total Held for Sale Properties $ 6,749 $ 19,906 $ — $ — $ — $ 859 $ 2,376 $ 29,890 115 Table of Contents As of December 31, 2023, the major components of the Company’s investments in real estate held by SPEs the Company consolidates, which are included in "Consolidated Real Estate Investments" on the Consolidated Balance Sheet, were as follows (in thousands): Operating Properties Land Buildings and Improvements Intangible Lease Assets Intangible Lease Liabilities Construction in Progress Furniture, Fixtures, and Equipment Totals White Rock Center $ 1,315 $ 10,345 $ 1,921 $ ( 101 ) $ — $ 5 $ 13,485 5916 W Loop 289 1,081 2,938 — — — — 4,019 Cityplace Tower 18,812 192,930 9,058 ( 6,669 ) 19,177 357 233,665 NexPoint Dominion Land, LLC 26,500 — — — — — 26,500 47,708 206,213 10,979 ( 6,770 ) 19,177 362 277,669 Accumulated depreciation and amortization — ( 13,490 ) ( 6,798 ) 2,203 — ( 237 ) ( 18,322 ) Total Operating Properties $ 47,708 $ 192,723 $ 4,181 $ ( 4,567 ) $ 19,177 $ 125 $ 259,347 Depreciation expense was $ 13.6 million for the year ended December 31, 2024 and $ 9.4 million for the year ended December 31, 2023. Amortization expense related to the Company’s intangible lease assets was $ 1.6 million for the year ended December 31, 2024 and $ 3.9 million for the year ended December 31, 2023. Amortization expense related to the Company's intangible lease liabilities was $ 1.4 million for the year ended December 31, 2024 and $ 1.5 million for the year ended December 31, 2023. The net amount amortized as an increase to rental revenue for capitalized above and below-market lease intangibles was $ 1.0 million for the year ended December 31, 2024 and $ 1.2 million for the year ended December 31, 2023. 116 Table of Contents Acquisitions During the year ended December 31, 2024, as a result of the NHT Acquisition, the Company consolidated the following properties: Dallas Hilton Garden Inn, Addison Property, Plano Homewood Suites, Las Colinas Homewood Suites, St. Petersburg Marriott, Hyatt Place Park City, Bradenton Hampton Inn & Suites. There were no acquisitions by the Company for the year ended December 31, 2023. 6. Debt The following table contains summary information of the Company’s debt as of December 31, 2024 and December 31, 2023 (dollars in thousands): Outstanding principal as of Description Type December 31, 2024 December 31, 2023 Interest Rate Maturity Date (8) Mortgages Payable CityPlace Note A-1 (1) Floating $ 99,435 $ 101,115 6.85 % 3/7/2025 CityPlace Note A-2 (1) Floating 12,517 12,729 6.85 % 3/7/2025 CityPlace Note B-1 (1) Floating 21,751 22,119 10.85 % 3/7/2025 CityPlace Note B-2 (1) Floating 2,738 2,784 10.85 % 3/7/2025 CityPlace Mezz Note-1 (1) Floating 3,107 3,160 10.85 % 3/7/2025 CityPlace Mezz Note-2 (1) Floating 391 398 10.85 % 3/7/2025 NHT - Note A Loan (2) Floating 50,188 — (7) 6.33 % 3/8/2025 NHT - Note B Loan (2) Floating 24,165 — (7) 10.79 % 3/8/2025 NHT - PC & B Loan (3) Floating 37,875 — (7) 6.70 % 2/5/2025 White Rock Center (4) Fixed 10,000 — (7) 10.00 % 8/2/2029 Notes Payable Dominion Note Floating 13,250 13,250 7.50 % 8/8/2025 Raymond James Loan Floating 11,000 20,000 8.80 % 10/6/2025 NexBank Revolver (5) Floating 16,485 20,000 8.03 % 5/21/2025 Convertible Notes Due to Affiliates Fixed 57,986 — (7) 2.25 % - 7.50 % 2/14/2027 - 9/30/2042 Prime Brokerage Borrowing Jefferies Line of Credit Floating 1,222 1,782 4.83 % N/A (9) Total Debt $ 362,110 $ 197,337 Fair market value adjustment, net of accumulated amortization (6) ( 7,740 ) — Deferred financing costs ( 315 ) ( 450 ) $ 354,055 $ 196,887 (1) This debt is secured by the following property: CityPlace. (2) This debt is secured by the following properties: HGI Property, Addison Property, Plano Homewood Suites, Las Colinas Homewood Suites and the St. Pete Property. (3) This debt is secured by the following properties: Park City and Bradenton. (4) This debt is secured by the following property: White Rock Center. (5) This debt is secured by the following property and investments: 5916 W Loop 289 and IQHQ, LP interests. 117 Table of Contents (6) The Company recorded a valuation adjustment of the Convertible Notes Due to Affiliates upon the consolidation of NHT to adjust for the difference between the fair value and the outstanding principal amount of the debt. The difference is amortized into interest expense. (7) This debt was not consolidated as of December 31, 2023. (8) See Note 18 for additional information regarding the maturity date of the loans. (9) This debt balance has no stated maturity date. Cityplace Debt The Company has debt on Cityplace pursuant to a Loan Agreement, originally dated August 15, 2018 and subsequently amended (the “Loan Agreement”). The debt is limited recourse to the Company and encumbers the property. The debt had an original maturity of September 8, 2022, and the Company deferred the maturity date with the lender to May 8, 2023, with the possibility to extend for an additional four months to September 8, 2023 provided certain metrics were met. On May 8, 2023, the lender agreed to defer the maturity of the Cityplace debt by four months to September 8, 2023. Also on May 8, 2023, the parties to the Loan Agreement agreed to convert the index upon which the interest rate is based to the one-month secured overnight financing rate ("SOFR") effective as of the first interest period beginning on or after May 8, 2023. On September 8, 2023, the lender agreed to defer the maturity of the Cityplace debt by six months to March 8, 2024. On March 8, 2024, the lender agreed to defer the maturity of the Cityplace debt by twelve months to March 7, 2025. The debt restructuring per the terms of the Thirteenth Omnibus Amendment Agreement was considered a debt modification. Management is currently engaged in discussions with the lender regarding the extension of the maturity date of the Cityplace debt. Management can give no assurance that the lender will agree to such an extension. While the lender has not yet demanded payment of the Cityplace indebtedness, management can give no assurance that it will not exercise its right to do so or exercise its other remedies under the credit agreement, including foreclosing on Cityplace. The weighted average interest rate of the Company’s debt related to its Cityplace investment was 7.65 % as of December 31, 2024 and 8.53 % as of December 31, 2023. The one-month SOFR was 4.33 % as of December 31, 2024 and 5.35 % as of December 31, 2023. The Loan Agreement contains customary events of default, including defaults in the payment of principal or interest, defaults in compliance with the covenants contained in the documents evidencing the loan, defaults in payments under any other security instrument covering any part of the property, whether junior or senior to the loan, and bankruptcy or other insolvency events. As of December 31, 2024, the Company believes it is in compliance with all such covenants. White Rock Center Debt On August 2, 2024, the Company, through Freedom LHV, LLC (“Freedom LHV”), an indirect subsidiary of the Company, borrowed approximately $ 10.0 million from The Ohio State Life Insurance Company (“OSL”). The note bears interest at an annual fixed rate of 10.0 % and matures on August 2, 2029. The debt is secured by certain real property held by Freedom LHV and is guaranteed by the Company. Notes Payable, NXDT On August 9, 2022, the Company borrowed approximately $ 13.3 million from the seller, Gabriel Legacy, LLC to finance its acquisition of 21.5 acres of land in Plano, Texas held through NexPoint Dominion Land, LLC, a wholly owned subsidiary of the OP. The note bears interest at an annual rate equal to the WSJ Prime Rate and matures on August 8, 2025, with two one-year extension options. Mortgages Payable, NHT On February 28, 2019, NHT, through subsidiaries of NHT OP, entered into a borrowing arrangement for a $ 59.4 million Note A loan (the “Note A Loan”) and a $ 28.6 million Note B loan (the “Note B Loan”) with ACORE Capital Mortgage, LP ("ACORE"). The Note A Loan and Note B Loan are secured by the HGI Property, Addison Property, Plano Homewood Suites, Las Colinas Homewood Suites and the St. Pete Property. The Note A Loan bears interest at a variable rate equal to the 30-day SOFR plus 2.00 % and matures on March 8, 2025. The Note B Loan bears interest at a variable rate equal to the 30-day SOFR plus 6.46 % and matures on March 8, 2025. See Note 18 for a discussion of the extension of the maturity dates of the Note A Loan and Note B Loan. The Note A Loan and Note B Loan principal amounts reflected their fair values on the date of the NHT Acquisition. As of December 31, 2024, the Note A Loan and the Note B Loan had an 118 Table of Contents outstanding balance of $ 50.2 million and $ 24.2 million and effective interest rates of 6.33 % and 10.79 %, respectively. For the year ended December 31, 2024, NHT paid $ 2.8 million and $ 2.2 million in interest on the Note A Loan and the Note B Loan, respectively. On February 15, 2022, in connection with the acquisition of the Park City and Bradenton properties, NHT, through subsidiaries of NHT OP, entered into a borrowing arrangement for a $ 39.3 million loan (the “PC & B Loan”) with AREEIF Lender, LLC. The PC & B Loan principal amount reflected its fair value on the date of the NHT Acquisition. The outstanding balance on the PC & B Loan as of December 31, 2024 was $ 37.9 million, with $ 1.4 million available to draw on for renovation purposes as of December 31, 2024. See Note 18 for a discussion of the extension of the maturity dates of the PC & B Loan. The loan documents, including the guaranty, for the PC & B Loan and the Note A Loan and Note B Loan contain customary representations, warranties, and events of default, which require NHT to comply with affirmative and negative covenants. As of December 31, 2024, NHT OP, the guarantor of certain obligations under the PC & B Loan documents, was not in compliance with the PC & B Loan covenants related to the minimum net worth and the minimum liquid assets. AREEIF Lender, LLC, the lender under the PC & B Loan has not granted a waiver for the covenant violations as of December 31, 2024. Notes Payable, NHT The NHT OP also entered into several convertible notes with affiliates of the NHT Adviser (as defined in Note 14) since January 8, 2019. The fixed rate notes have rates ranging from 2.25 % to 7.50 % (which were market interest rates at the time of their issuance) while outstanding and mature in 20 years from their date of issuance, with the earliest maturing on February 14, 2027 and the latest maturing on September 30, 2042. For $ 3.6 million of the notes, the principal and interest is convertible into NHT OP Class B Units (at the option of their respective holder) at the market price of the NHT Units at the time of conversion any time during the term of the note. For $ 38.0 million of the notes, the principal of the notes is convertible into NHT OP Class B Units, at prices ranging from $ 1.60 to $ 2.50 for a period of five years from its date of issuance (with the expiration of conversion rights ranging from June 25, 2026 to September 30, 2027). One note issued to Highland Global Allocation Fund in the amount of $ 8.5 million is not convertible into NHT OP Class B Units. On October 30, 2023, the TSX Venture Exchange (the "TSXV") approved the issuance of up to 21,075,012 NHT Units in connection with the redemption of NHT OP Class B Units issued to a holder of notes on conversion of the $ 38.0 million of notes. With respect to the $ 3.6 million of notes convertible on the basis of the market price of the NHT Units at the time of the conversion, any issuance of NHT Units in connection with a redemption of NHT OP Class B Units received by holders on a conversion of such notes is subject to the prior approval of the TSXV. The relative fair value of the convertible notes did not reflect the outstanding principal on the date of the NHT Acquisition. The difference between the fair value and the principal amount of debt is amortized into interest expense over the remaining term. As of December 31, 2024, the net carrying amount of the convertible notes due to affiliates of the NHT Adviser was $ 50.2 million. Credit Facility On January 8, 2021, the Company entered into a $ 30.0 million credit facility (the "Credit Facility") with Raymond James Bank, N.A. and drew the full balance. On October 20, 2023, Raymond James Bank, N.A. agreed to amend the terms of the Credit Facility, which, among other things, extended the maturity date to October 6, 2025 and amended the credit limit to $ 20.0 million. On October 23, 2023, the Company drew $ 6.0 million of the available balance. On November 20, 2023, the Company drew the remaining $ 13.0 million of the available balance. During the year ended December 31, 2024, the Company paid down $ 9.0 million on the Credit Facility. As of December 31, 2024, the Credit Facility had an outstanding balance of $ 11.0 million and bore interest at the one-month SOFR plus 4.25 %. Revolving Credit Facility On May 22, 2023, the Company entered into a $ 20.0 million revolving credit facility (the "NexBank Revolver") with NexBank, in the initial principal balance of $ 20.0 million, with the option for the Company to receive additional disbursements thereunder up to a maximum of $ 50.0 million, a maturity date of May 21, 2024 and the option to extend the maturity two times by six months. On May 21, 2024, the Company elected to extend the maturity by six months to November 21, 2024. On November 21, 2024, the Company elected to extend the maturity by six months to May 21, 2025. During the year ended December 31, 2024, the Company paid down $ 3.5 million on the NexBank Revolver. As of 119 Table of Contents December 31, 2024, the NexBank Revolver bears interest at one-month SOFR plus 3.50 % and matures on May 21, 2025. As of December 31, 2024, the NexBank Revolver had an outstanding balance of $ 16.5 million. Deferred Financing Costs The Company defers costs incurred in obtaining financing and amortizes the costs over the terms of the related loans using the straight-line method, which approximates the effective interest method. Deferred financing costs, net of amortization, are recorded as a reduction from the related debt on the Company’s Consolidated Balance Sheet. Upon repayment of or in conjunction with a material change in the terms of the underlying debt agreement, any unamortized costs are charged to loss on extinguishment of debt and modification costs. Prime Brokerage Borrowing Effective July 2, 2022, the Company entered a prime brokerage account with Jefferies to hold securities owned by the Company (the "Prime Brokerage"). The Company from time to time borrows against the value of these securities. As of December 31, 2024, the Company had a margin balance of approximately $ 1.2 million outstanding with Jefferies bearing interest at the Overnight Bank Funding Rate plus 0.50 %. Securities with a fair value of approximately $ 12.7 million are pledged as collateral against this margin balance. This arrangement has no stated maturity date. Due to the short-term nature of the debt, the fair value of the debt is approximately the outstanding balance. Schedule of Debt Maturities The aggregate scheduled maturities, including amortizing principal payments, of total debt for the next five calendar years subsequent to December 31, 2024 are as follows (in thousands): Mortgages Payable Credit Facilities Notes Payable Prime Brokerage Borrowing Total 2025 $ 252,167 $ 27,485 $ 13,250 $ — $ 292,902 2026 — — — — — 2027 — — 20,500 — 20,500 2028 — — — — — 2029 10,000 — — — 10,000 Thereafter — — 37,486 1,222 38,708 Total $ 262,167 $ 27,485 $ 71,236 $ 1,222 $ 362,110 120 Table of Contents 7. Variable Interest Entities As of December 31, 2024, and 2023, the Company does not consolidate the investments below as it does not have a controlling financial interest in these investments: Entities Instrument Asset Type Percentage Ownership as of December 31, 2024 Percentage Ownership as of December 31, 2023 Relationship as of December 31, 2024 Relationship as of December 31, 2023 Unconsolidated Entities: NexPoint Storage Partners, Inc. Common stock Self-storage 52.8 % 52.9 % VIE VIE NexPoint Storage Partners Operating Company, LLC LLC interest Self-storage 29.5 % 30.0 % VIE VIE Perilune Aero Equity Holdings One, LLC LLC interest Aircraft 16.4 % 16.4 % VIE VIE Life Sciences II DST DST investment Life science 25.8 % N/A VIE N/A Semiconductor DST DST investment Industrial 16.8 % N/A VIE N/A Capital Acquisitions Partners, LLC LLC interest Multifamily 20.9 % N/A VIE N/A IQHQ Holdings, LP LP interest Life science 1.2 % 1.3 % VIE VIE NexPoint Real Estate Finance Operating Partnership, L.P. LP interest Mortgage 15.6 % 15.6 % VIE VIE VineBrook Homes Operating Partnership, L.P. LP interest Single-family rental 11.4 % 11.2 % VIE VIE NexPoint SFR Operating Partnership, L.P. LP interest Single-family rental 30.8 % 30.8 % VIE VIE NexAnnuity Holdings, Inc. Preferred Shares Annuities 100.0 % (1) 100.0 % VIE VIE (1) The Company owns 100% of the preferred stock of NexAnnuity Holdings, Inc. ("NHI"), but it does not own any of the outstanding common stock of NHI. The maximum exposure to loss of value for the VIE investments includes both the carrying value of each investment, as presented in the tables in Note 8 and 10, and the Company’s exposure through additional arrangements. The Company has provided guarantees on certain debt obligations of some of the VIEs, see Note 15 for further details. Consolidated VIEs The Company did not have any consolidated VIEs as of December 31, 2024 and December 31, 2023. 121 Table of Contents 8. Equity Method Investments Below is a summary of the Company’s equity method investments as of December 31, 2024 (dollars in thousands): Investee Name Instrument Asset Type NXDT Percentage Ownership Investment Basis Share of Investee's Net Assets (1) Basis Difference (2) Share of Earnings (Loss) Sandstone Pasadena Apartments, LLC LLC interest Multifamily 50.0 % $ 10,055 $ ( 9,590 ) $ 19,645 $ 70 AM Uptown Hotel, LLC LLC interest Hospitality 60.0 % (3) 18,081 14,970 3,111 ( 155 ) Las Vegas Land Owner, LLC LLC interest Land 77.0 % (4) 12,321 12,321 — 10 Perilune Aero Equity Holdings One, LLC LLC interest Aircraft 16.4 % (8) 13,565 10,488 3,077 1,414 Capital Acquisitions Partners, LLC LLC interest Multifamily 20.9 % 407 1,717 ( 1,310 ) 126 $ 54,429 $ 29,906 $ 24,523 $ 1,465 Below is a summary of the Company's investments as of December 31, 2024 that qualify for equity method accounting for which the Company has elected to account for using the fair value option. Amounts are included in "Investments, at fair value" on the Consolidated Balance Sheets. Investee Name Instrument Asset Type NXDT Percentage Ownership Fair Value NexPoint Real Estate Finance Operating Partnership, L.P. LP interest Mortgage 15.6 % (6) $ 76,396 NexPoint Real Estate Finance, Inc. Common stock Mortgage 12.0 % (6) 32,949 Claymore Holdings, LLC LLC interest N/A 50.0 % (5) — Allenby, LLC LLC interest N/A 50.0 % (5) — Haygood, LLC LLC interest N/A 31.0 % (7) — LLV Holdco, LLC LLC interest Land 26.8 % 2,606 NexPoint Storage Partners, Inc. Common stock Self-storage 52.8 % (6) 62,709 NexPoint Storage Partners Operating Company, LLC LLC interest Self-storage 29.5 % 34,172 VineBrook Homes Operating Partnership, L.P. LP interest Single-family rental 11.4 % (6) 151,706 NexPoint SFR Operating Partnership, L.P. LP interest Single-family rental 30.8 % 37,953 $ 398,491 122 Table of Contents Below is a summary of the Company’s equity method investments as of December 31, 2023 (dollars in thousands): Investee Name Instrument Asset Type NXDT Percentage Ownership Investment Basis Share of Investee's Net Assets (1) Basis Difference (2) Share of Earnings (Loss) Sandstone Pasadena Apartments, LLC LLC interest Multifamily 50.0 % $ 11,458 $ ( 9,590 ) $ 21,048 $ — AM Uptown Hotel, LLC LLC interest Hospitality 60.0 % (3) 23,158 17,581 5,577 ( 426 ) SFR WLIF III, LLC LLC interest Single-family rental 20.0 % 7,079 7,241 ( 162 ) 555 Las Vegas Land Owner, LLC LLC interest Land 77.0 % (4) 12,312 12,312 — — Perilune Aero Equity Holdings One, LLC LLC interest Aircraft 16.4 % (7) 12,256 10,488 1,768 1,441 $ 66,263 $ 38,032 $ 28,231 $ 1,570 Below is a summary of the Company's investments as of December 31, 2023 that qualify for equity method accounting for which the Company has elected to account for using the fair value option. Amounts are included in "Investments, at fair value" on the Consolidated Balance Sheets. Investee Name Instrument Asset Type NXDT Percentage Ownership Fair Value NexPoint Real Estate Finance Operating Partnership, L.P. LP interest Mortgage 15.6 % (6) $ 76,688 NexPoint Real Estate Finance, Inc. Common stock Mortgage 12.0 % (6) 33,075 VineBrook Homes Operating Partnership, L.P. LP interest Single-family rental 11.2 % (6) 146,516 NexPoint Storage Partners, Inc. Common stock Self-storage 52.9 % (3) 68,187 NexPoint Storage Partners Operating Company, LLC LLC interest Self-storage 30.0 % 37,157 Claymore Holdings, LLC LLC interest N/A 50.0 % (5) — Allenby, LLC LLC interest N/A 50.0 % (5) — Haygood, LLC LLC interest N/A 31.0 % (7) — NexPoint SFR Operating Partnership, L.P. LP interest Single-family rental 30.8 % 49,383 NexPoint Hospitality Trust Common stock Hospitality 46.2 % 4,886 LLV Holdco, LLC LLC interest Land 26.8 % 2,242 $ 418,134 (1) Represents the Company’s percentage share of net assets of the investee per the investee’s books and records. 123 Table of Contents (2) Represents the difference between the basis at which the investments in unconsolidated ventures are carried by the Company and the Company's proportionate share of the equity method investee's net assets. To the extent that the Company’s cost basis is different from the basis reflected at the joint venture level, the basis difference is generally amortized over the lives of the related assets and liabilities, and such amortization is included in the Company’s share of equity in earnings of the joint venture. (3) The Company owns greater than 50% of the outstanding common equity but is not deemed to be the primary beneficiary or have a controlling financial interest of the investee and as such, accounts for the investee using the equity method. (4) The Company owns 100 % of Las Vegas Land Owner, LLC which owns 77 % of a joint venture that owns an 8.5 acre tract of land (the "Tivoli North Property"). Through a tenants in common arrangement, the Company shares control and as such accounts for this investment using the equity method. (5) The Company has a 50 % non-controlling interest in Claymore Holdings, LLC (“Claymore”) and Allenby, LLC, (“Allenby”). The Company has determined it is not the primary beneficiary and does not consolidate these entities. (6) The Company owns less than 20% of the investee but has significant influence due to members of the management team serving on the board of the investee or its parent and as such, accounts for the investee using the equity method. (7) The Company has a 31 % non-controlling interest in Haygood, LLC, (“Haygood”). The Company has determined it is not the primary beneficiary and does not consolidate this entity. (8) The Company owns less than 20% of the investee but has significant influence due to the legal nature of a partnership that implies an inherent right to influence the operating and financial policies of the partnership. 124 Table of Contents Significant Equity Method Investments For its annual reporting, the Company assesses and presents summarized financial information for its significant equity method investments in accordance with Rule 8-03(b)(3) of Regulation S-X. Beginning with its annual reporting for fiscal year ended December 31, 2023, the Company elected to report the financial information on a three-month lag, to align with the availability of investee financials. NexPoint Real Estate Finance, Inc. ("NREF"), VineBrook Homes Trust, Inc. ("VineBrook") and NexPoint Storage Partners, Inc. (“NSP”) do not prepare standalone financials for their operating companies as all operations and investments are owned through their operating companies and are consolidated by the corporate entities. The table below presents summarized statement of operations for the nine months ended September 30, 2024 for the Company’s equity method investments (dollars in thousands): NREF VineBrook NSP Other Total Revenues Rental income $ 6,316 $ 268,115 $ 89,686 $ 8,422 $ 372,539 Net interest income 6,444 — 1,477 3,344 11,265 Other income 728 4,571 4,687 48,066 58,052 Total revenues 13,488 272,686 95,850 59,832 441,856 Expenses Total expenses 27,664 393,196 99,135 20,263 540,258 Gain (loss) on sales of real estate — ( 19,773 ) 621 — ( 19,152 ) Other income (expense) 34,982 1,485 ( 81,743 ) ( 17,872 ) ( 63,148 ) Unrealized gain (loss) on derivatives — ( 18,055 ) — — ( 18,055 ) Total comprehensive income (loss) $ 20,806 $ ( 156,853 ) $ ( 84,407 ) $ 21,697 $ ( 198,757 ) The table below presents the summarized statement of operations for the nine months ended September 30, 2023 for the Company’s significant equity method investments (dollars in thousands): NREF VineBrook NSP Other Total Revenues Rental income $ 3,057 $ 259,121 $ 83,851 $ 11,771 $ 357,800 Net interest income 12,971 — 1,527 3,249 18,172 Other income — 4,362 6,154 21,109 31,200 Total revenues 16,028 263,483 91,532 36,129 407,172 Expenses Total expenses 16,950 368,968 103,968 26,092 515,978 — Gain (loss) on sales of real estate — ( 65,108 ) ( 7,276 ) — ( 72,384 ) Other income (expense) 1,727 ( 43,130 ) ( 77,006 ) ( 10,662 ) ( 129,071 ) Unrealized gain (loss) on derivatives — 6,297 — — 6,297 Total comprehensive income (loss) $ 805 $ ( 207,426 ) $ ( 96,718 ) $ ( 625 ) $ ( 303,964 ) 125 Table of Contents 9. Fair Value of Financial Instruments The table below summarizes the Company’s assets within the valuation hierarchy carried at fair value on a recurring basis as of December 31, 2024 (in thousands): Fair Value Level 1 Level 2 Level 3 Total Assets Bond $ — $ 62 $ — $ 62 Common stock 46,436 — 157,828 204,264 Convertible notes — — 20,846 20,846 LLC interest — — 36,777 36,777 LP interest — 76,396 189,659 266,055 Preferred Shares — — 69,895 69,895 Rights and warrants — 1,788 — 1,788 Senior loan — 52 43,693 43,745 $ 46,436 $ 78,298 $ 518,698 $ 643,432 The table below summarizes the Company’s assets within the valuation hierarchy carried at fair value on a recurring basis as of December 31, 2023 (in thousands): Fair Value Level 1 Level 2 Level 3 Total Assets Bond $ — $ 30 $ — $ 30 CLO — — 1,215 1,215 Common stock 42,832 — 176,256 219,088 Convertible notes — — 42,251 42,251 LLC interest — — 39,399 39,399 LP interest — 76,688 195,898 272,586 Preferred Shares — — 66,268 66,268 Rights and warrants — 3,993 — 3,993 Senior loan — 55 46,353 46,408 $ 42,832 $ 80,766 $ 567,640 $ 691,238 126 Table of Contents The table below sets forth a summary of changes in the Company’s Level 3 assets (assets measured at fair value using significant unobservable inputs) for the year ended December 31, 2024 (in thousands): December 31, 2023 Contributions/ Purchases Paid in- kind dividends Transfer Into (Out of) Level 3 Investments (Eliminated) Acquired Through Consolidation¹ Redemptions/ conversions Return of capital Realized gain/(loss) Unrealized gain/(loss) December 31, 2024 CLO $ 1,215 $ — $ — $ — $ — $ — $ ( 1,266 ) $ ( 22,735 ) $ 22,786 $ — Common stock 176,256 904 — — ( 7,757 ) — — — ( 11,575 ) 157,828 Convertible notes 42,251 — — — ( 21,129 ) — — — ( 276 ) 20,846 LLC interest 39,399 742 — — — — — — ( 3,364 ) 36,777 LP interest 195,898 5,459 — — — — — — ( 11,698 ) 189,659 Preferred Shares 66,268 — 5,327 — — ( 1,700 ) — — — 69,895 Senior loan 46,353 7,282 4,350 — — ( 14,902 ) — 633 ( 23 ) 43,693 Total $ 567,640 $ 14,387 $ 9,677 $ — $ ( 28,886 ) $ ( 16,602 ) $ ( 1,266 ) $ ( 22,102 ) $ ( 4,150 ) $ 518,698 (1) As a result of the NHT consolidation, certain investments were eliminated or acquired. The table below sets forth a summary of changes in the Company’s Level 3 assets (assets measured at fair value using significant unobservable inputs) for the year ended December 31, 2023 (in thousands): December 31, 2022 Contributions/ Purchases Paid in- kind dividends Transfer Into Level 3 Redemptions/ conversions Return of capital Realized gain/(loss) Unrealized gain/(loss) December 31, 2023 CLO $ 6,412 $ — $ — $ 563 $ — $ ( 9,170 ) $ ( 1,601 ) $ 5,011 $ 1,215 Common stock 234,667 — — — ( 305 ) — — ( 58,106 ) 176,256 Convertible notes 50,828 — 125 — ( 8,542 ) — — ( 160 ) 42,251 Life settlement 67,711 3,355 — — ( 67,506 ) — ( 1,101 ) ( 2,459 ) — LLC interest 60,836 334 — — — — — ( 21,771 ) 39,399 LP interest 223,141 5,528 — — — — — ( 32,771 ) 195,898 Preferred Shares — 68,500 1,768 — ( 4,000 ) — — — 66,268 Senior loan 43,341 5,500 4,059 — ( 7,007 ) — 223 237 46,353 Total $ 686,936 $ 83,217 $ 5,952 $ 563 $ ( 87,360 ) $ ( 9,170 ) $ ( 2,479 ) $ ( 110,019 ) $ 567,640 127 Table of Contents The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following is a summary of the significant unobservable inputs used in the fair valuation of assets categorized within Level 3 of the fair value hierarchy as of December 31, 2024. Category Valuation Technique Significant Unobservable Inputs Input Value(s) (Arithmetic Mean) Fair Value Common Stock Market Approach Unadjusted Price/MHz-PoP $ 0.10 — $ 0.90 $( 0.48 ) $ 157,828 Discounted Cash Flow Discount Rate 7.00 % — 14.50 % ( 9.63 )% Market Rent (per sqft) $ 13.00 — $ 42.50 $( 27.75 ) NAV Approach Discount Rate 10.00 % NAV per Share $ 12.75 Multiple of EBITDA 3.00 x — 4.25 x ( 3.63 )x Recent Transaction Implied Enterprise Value from Transaction Price ($mm) $ 1,149.00 N/A $ 25.31 — $ 28.00 $( 26.66 ) Discount to NAV ( 30.00 )% — ( 20.00 )% ( 25.00 )% Offer Price per Share $ 4.27 Convertible Notes Discounted Cash Flow Discount Rate 6.08 % — 8.08 % ( 7.08 )% 20,846 LLC Interest Discounted Cash Flow Discount Rate 7.00 % — 26.00 % ( 12.5 )% 36,777 Market Rent (per sqft) $ 13.00 — $ 42.50 $( 27.75 ) Capitalization Rate 5.13 % LP Interest Direct Capitalization Approach Capitalization Rate 5.25 % — 5.50 % ( 5.38 )% 189,659 Market Approach Discount to NAV ( 7.5 )% Recent Transaction Price per Share $ 16.41 Preferred Shares Liquidation Analysis Par $ 1,000 69,895 Senior Loan Discounted Cash Flow Discount Rate 13.30 % — 26.00 % ( 19.65 )% 43,693 Total $ 518,698 128 Table of Contents The following is a summary of the significant unobservable inputs used in the fair valuation of assets categorized within Level 3 of the fair value hierarchy as of December 31, 2023. Category Valuation Technique Significant Unobservable Inputs Input Value(s) (Arithmetic Mean) Fair Value CLO Discounted Net Asset Value Discount N/A $ 1,215 Common Stock Market Approach Unadjusted Price/MHz-PoP $ 0.10 — $ 0.90 $( 0.48 ) 176,256 Discounted Cash Flow Discount Rate 7.5 % — 13.90 % ( 9.18 )% Market Rent (per sqft) $ 11.50 — $ 41.00 $( 26.25 ) RevPAR $ 75.00 — $ 145.00 $( 102.00 ) Capitalization Rates 5.25 % — 9.5 % ( 7.58 )% NAV Approach Discount Rate 10.00 % Multiples Analysis Multiple of EBITDA 3.00 x — 4.00 x ( 3.50 )x Multiple of NAV 1.00 x — 1.25 x ( 1.13 )x Recent Transaction Implied Enterprise Value from Transaction Price ($mm) $ 841.00 N/A $ 25.31 — $ 28.00 $( 26.66 ) Discount to NAV ( 25.00 )% — ( 10.00 )% ( 17.50 )% Offer Price per Share $ 1.10 Convertible Notes Discounted Cash Flow Discount Rate 6.08 % — 10.25 % ( 8.17 )% 42,251 Option Pricing Model Volatility 55.00 % — 65.00 % ( 60.00 )% LLC Interest Discounted Cash Flow Discount Rate 7.50 % — 30.50 % 14 % 39,399 Market Rent (per sqft) $ 11.5 — $ 41 $( 26.25 ) Capitalization Rate 5.25 % LP Interest Direct Capitalization Approach Capitalization Rate 4.00 % — 6.80 % 5.51 % 195,898 Discount to NAV ( 12.5 )% — ( 2.5 )% (- 7.5 %) Market Approach Capitalization Rate 5.00 % — 5.50 % ( 5.22 )% Recent Transaction Price per Share $ 21.59 Preferred Shares Recent Transaction Price per Share $ 1,000 66,268 Senior Loan Discounted Cash Flow Discount Rate 12.30 % — 20.00 % ( 16.15 )% 46,353 Total $ 567,640 129 Table of Contents Financial Instruments Not Carried at Fair Value At December 31, 2024 and December 31, 2023, the fair values of cash and cash equivalents, restricted cash, accounts receivable, prepaid and other assets, accrued interest and dividends, accounts payable and other accrued liabilities, accrued real estate taxes payable, accrued interest payable, income tax payable, security deposits and prepaid rent approximated their carrying values because of the short-term nature of these instruments. The estimated fair values of other financial instruments were determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair values. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company would realize on the disposition of the financial instruments. The use of different market assumptions or estimation methodologies may have a material effect on the estimated fair value amounts. In calculating the fair value of its long-term indebtedness, the Company used interest rate and spread assumptions that reflect current credit worthiness and market conditions available for the issuance of long-term debt with similar terms and remaining maturities. These financial instruments utilize Level 2 inputs. Long-term indebtedness is carried at amounts that reasonably approximate their fair value at December 31, 2024 and 2023, except for the following debt (in thousands): December 31, 2024 December 31, 2023 Outstanding Principal Balance Estimated Fair Value Outstanding Principal Balance Estimated Fair Value Notes payable $ 98,721 $ 78,607 $ 53,250 $ 53,250 Derivative Financial Instruments and Hedging Activities The Company manages interest rate risks primarily by managing the amount, sources, and duration of its debt funding and the use of derivative financial instruments. The Company performs market valuations on its derivative financial instruments. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair values of interest rate caps are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. Interest rate caps involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium. The NHT segment has an interest rate cap agreement related to the notes payable on the Park City and Bradenton properties. As of December 31, 2024, the interest rate cap agreements effectively cap one-month SOFR on $ 37.9 million of the NHT segment's floating rate mortgage and mezzanine indebtedness at a weighted average rate of 6.70 %. To comply with the provisions of ASC 820, Fair Value Measurement, the NHT segment incorporates credit valuation adjustments to appropriately reflect both the NHT segment’s own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with the NHT segment’s derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the NHT segment and its counterparties. The Company has determined that the significance of the impact of the credit valuation adjustments made to the NHT segment's derivative contracts, which determination was based on the fair value of each individual contract, was not significant to the overall valuation. Additionally, in the case of interest rate caps, the NHT segment has no performance obligation, so no credit valuation adjustment is necessary. As a result, all of the NHT segment’s derivatives held as of December 31, 2024 were classified as Level 2 of the fair value hierarchy. Changes in fair value of the interest rate caps are recorded directly as interest expense on the Consolidated Statement of Operations and Comprehensive Income (Loss). For the year ended December 31, 2024, NHT recorded $( 27.1 ) thousand in interest expense related to changes in the fair value of interest rate caps. The combined fair value of the interest rate caps is $ 0.2 million as of December 31, 2024, and is recorded as interest rate caps in the Consolidated Balance Sheets. 130 Table of Contents As of December 31, 2024, the NHT segment had the following outstanding interest rate caps: Type of Derivative Hedged Financial Instrument Notional Strike Rate Reference Rate Termination Date Interest rate cap Note payable $ 39,300 2.00 % One-month SOFR 2.00 % March 5, 2025 10. Investments in DSTs The Company invested in the Class 1 Beneficial Interests (“Class 1”) in two Delaware Statutory Trusts (DSTs). The Class 1 are accounted for as investments in equity securities without readily determinable fair values under the measurement alternative, which measures the investment at cost minus impairment, if any, plus or minus changes in fair value when observable prices are identified. As the Class 1 are still being actively issued, the investments are held at cost with no upward or downward fair value adjustment nor impairment losses to date. Therefore, the fair value of the Investment in DSTs utilizing Level 3 inputs approximate their carrying amount. The Company recognized $ 0.7 million in dividend income for the year ended December 31, 2024, and no dividend income for the year ended December 31, 2023. As of December 31, 2024, the Company held the following investments (dollars in thousands): Balances, as of December 31, 2024 Number of Shares Carrying Amount NexPoint Life Sciences II DST 1,044,040 $ 9,600 NexPoint Semiconductor DST 2,296,851 20,959 Total $ 30,559 11. Life Settlement Portfolio Prior to September 1, 2023, the Company, through one of its TRSs, owned 100 % of the outstanding equity and debt of Specialty Financial Products, Ltd. ("SFP"), an Ireland domiciled private company with limited liability and a Designated Activity Company. At the proposal of NexAnnuity Asset Management, L.P. ("NexAnnuity"), an affiliate of the Adviser, SFP was formed for the purpose of entering into acquisitions of U.S. life settlement policies approved by NexAnnuity and funded by the issuance of debt securities, or the Structured Note purchased by the Company. SFP utilizes proceeds from maturing life settlement contracts to repay the Structured Note and to further invest in life settlement contracts. Prior to September 1, 2023, as the Company owned the outstanding ordinary shares of and Structured Note issued by SFP, the Company consolidated SFP in its entirety. On September 1, 2023, the Company, through one of its TRSs, entered into a contribution agreement to transfer the Structured Note in SFP and all its rights, title and interests to NHI and its wholly owned subsidiaries, which are related parties. The Company also transferred all of its ordinary shares in SFP to a separate share trustee. In exchange, the Company was issued 68,500 shares of Class A Preferred Stock in NHI. As a result, the Company now holds none of the outstanding equity and debt of SFP, and SFP no longer meets the requirements for consolidation under ASC 810 – Consolidation. The Company has no continuing involvement with SFP. As such, SFP has been deconsolidated herein as of September 1, 2023. The Class A Preferred Stock in NHI is accounted for as an investment in an equity security. However, management has elected to account for the investment using the fair value option and presented it within Investments, at fair value. Dividends on the Class A Preferred Stock are cumulative and are payable quarterly on March 31, June 30, September 30, and December 31 at an annual rate of 8.0 % for years one through seven, 9.5 % for years eight through ten, 11.0 % for years eleven through thirteen, and 12.0 % for years fourteen through sixteen and thereafter. The transfer of the Structured Note of SFP qualified as a sale under ASC 860 – Transfers and Servicing as (1) the transfer legally isolated the transferred assets from the transferor, (2) the transferee has the right to pledge or exchange the transferred assets and no condition both constrains the transferee’s right to pledge or exchange the assets and provides more than a trivial benefit to the transferor, and (3) the transferor does not maintain effective control over the transferred assets. 131 Table of Contents 12. Shareholders ’ Equity Common Shares As of December 31, 2024, the Company had 42,679,569 common shares, par value $ 0.001 per share, issued and outstanding, 4,289,969 of which were issued during the year ended December 31, 2024. During the year ended December 31, 2024, the Company paid a distribution of $ 0.15 per share on its common shares on March 28, 2024 to shareholders of record on February 16, 2024, June 28, 2024 to shareholders of record on May 15, 2024, September 30, 2024 to shareholders of record on August 15, 2024 December 31, 2024, to shareholders of record on November 15, 2024. The distributions paid on March 28, 2024, June 28, 2024, September 30, 2024 and December 31, 2024 consisted of a combination of cash and shares, with the cash component of the distribution (other than cash paid in lieu of fractional shares) comprising 20 % of the distribution, with the balance being paid in the Company's common shares. As of December 31, 2023, the Company had 38,389,600 common shares, par value $ 0.001 per share, issued and outstanding. 1,217,792.99 shares were issued during the year ended December 31, 2023. During the year ended December 31, 2023, the Company paid a distribution of $ 0.15 per share on its common shares on March 31, 2023 to shareholders of record on March 15, 2023, June 30, 2023 to shareholders of record on June 15, 2023, September 29, 2023 to shareholders of record on August 15, 2023 and December 29, 2023 to shareholders of record on November 17, 2023. The distributions paid on September 29, 2023 and December 29, 2023 consisted of a combination of cash and shares, with the cash component of the distribution (other than cash paid in lieu of fractional shares) comprising 20 % of the dividend, with the balance being paid in the Company’s common shares. Series A Preferred Shares On January 8, 2021, the Company issued 3,359,593 5.50 % Series A Cumulative Preferred Shares, par value $ 0.001 per share, liquidation preference $ 25.00 per share ("Series A Preferred Shares") with an aggregate liquidation preference of approximately $ 84.0 million. The Series A Preferred Shares were issued as part of the consideration for an exchange offer for a portion of the Company’s common shares. The Series A Preferred Shares are callable beginning on December 15, 2023 at a price of $ 25 per share. The Company may exercise its call option at the Company's discretion. As a result, these are included in permanent equity. During the year ended December 31, 2024, the Company declared four distributions on its Series A Preferred Shares, each in the amount of $ 0.34375 per share, which were paid to holders of Series A Preferred Shares on April 1, 2024, to shareholders of record on March 25, 2024, July 1, 2024, to shareholders of record on June 24, 2024, September 30, 2024 to shareholders of record on September 23, 2024 and December 31, 2024, to shareholders of record on December 23, 2024. During the year ended December 31, 2023, the Company declared four distributions on its Series A Preferred Shares, each in the amount of $ 0.34375 per share, which were paid to holders of record of Series A Preferred Shares on March 31, 2023 to shareholders of record on March 24, 2023, June 30, 2023 to holders of record of Series A Preferred Shares on June 23, 2023 and September 30, 2023 to holders of record of Series A Preferred Shares on September 25, 2023. Distributions on the Series A Preferred Shares are cumulative from their original issue date at the annual rate of 5.5 % of the $ 25 per share liquidation preference and are payable quarterly on March 31, June 30, September 30, and December 31 of each year, or in each case on the next succeeding business day. Long Term Incentive Plan, NXDT On January 30, 2023, the Company’s shareholders approved a long-term incentive plan (the “2023 LTIP”) and the Company subsequently filed a registration statement on Form S-8 registering 2,545,000 common shares, which the Company may issue pursuant to the 2023 LTIP. The 2023 LTIP authorizes the compensation committee of the Board to provide equity-based compensation in the form of share options, appreciation rights, restricted shares, restricted share units, performance shares, performance units and certain other awards denominated or payable in, or otherwise based on, the Company’s common shares or factors that may influence the value of the Company’s common shares, plus cash incentive awards, for the purpose of providing the Company’s trustees, officers and other key employees (and those of the Adviser and the Company’s subsidiaries), and potentially certain nonemployees who perform employee-type functions, incentives and rewards for performance (the "participants"). 132 Table of Contents Restricted Share Units . Under the 2023 LTIP, restricted share units may be granted to the participants and typically vest over a three to five-year period for officers, employees and certain key employees of the Adviser and annually for trustees. The most recent grant of restricted share units to officers, employees and certain key employees of the Adviser will vest over a four-year period. Beginning on the date of grant, restricted share units earn dividends that are payable in cash on the vesting date. Compensation expense is recognized on a straight-line basis over the total requisite service period for the entire award. Forfeitures are recognized as they occur. The following table includes the number of restricted stock units granted to its directors, officers, employees and certain key employees of the Adviser under the 2023 LTIP: Summary of Grants March April Total 2023 — 603,482 603,482 2024 1,033,787 — 1,033,787 Total 1,033,787 603,482 1,637,269 As of December 31, 2024 and 2023, the Company had 1,438,049 and 589,906 unvested units under the 2023 LTIP, respectively. The following table includes the number of restricted share units granted, vested, forfeited and outstanding as of and for the year ended December 31, 2024: 2024 Number of Units Weighted Average Grant Date Fair Value Outstanding January 1, 2024 589,906 $ 10.45 Granted 1,033,787 6.10 Vested ( 178,859 ) (1) 10.36 Forfeited ( 6,785 ) 6.10 Outstanding December 31, 2024 1,438,049 $ 7.35 (1) Certain key employees of the Adviser elected to net the taxes owed upon the vesting against the shares issued resulting in 145,433 shares being issued as shown on the Consolidated Statement of Stockholders’ Equity. The following table contains information regarding the vesting of restricted share units under the 2023 LTIP as of December 31, 2024: Shares Vesting March April Total 2025 300,594 140,391 440,985 2026 242,136 135,328 377,464 2027 242,136 135,328 377,464 2028 242,136 — 242,136 2029 — — — Total 1,027,002 411,047 1,438,049 For the year ended December 31, 2024 and 2023, the Company recognized approximately $ 3.0 million and $ 1.4 million, respectively, of equity-based compensation expense related to grants of restricted share units. As of December 31, 2024, the Company had recognized a liability of approximately $ 0.9 million related to dividends earned on restricted share units that are payable in cash upon vesting. As of December 31, 2024, total unrecognized compensation expense on restricted share units was approximately $ 8.0 million, and the expense is expected to be recognized over a weighted average vesting period of 1.5 years. As of December 31, 2023, total unrecognized compensation expense on 133 Table of Contents restricted share units was approximately $ 4.8 million, and the expense is expected to be recognized over a weighted average vesting period of 1.6 years. 13. Earnings (Loss) Per Share Basic earnings (loss) per share is computed by dividing net income (loss) attributable to common shareholders by the weighted average number of the Company’s common shares outstanding and excludes any unvested restricted share units issued pursuant to the 2023 LTIP. Diluted earnings (loss) per share is computed by adjusting basic earnings per share for the dilutive effect of the assumed vesting of restricted share units. During periods of net loss, the assumed vesting of restricted share units is anti-dilutive and is not included in the calculation of earnings (loss) per share. The following table sets forth the computation of basic and diluted earnings (loss) per share (in thousands, except per share amounts): Year Ended December 31, 2024 2023 Numerator for loss per share: Net income (loss) attributable to common shareholders $ ( 51,349 ) $ ( 121,860 ) Denominator for loss per share: Weighted average common shares outstanding 40,229 37,334 Denominator for basic and diluted loss per share 40,229 37,334 Weighted average unvested restricted share units 1,269 440 Denominator for diluted loss per share (1) 40,229 37,334 Loss per weighted average common share: Basic $ ( 1.28 ) $ ( 3.26 ) Diluted $ ( 1.28 ) $ ( 3.26 ) (1) If the Company sustains a net loss for the period presented, unvested restricted share units are not included in the diluted earnings per share calculation. 14. Related Party Transactions Advisory and Administrative Fees, NXDT Pursuant to the Advisory Agreement, subject to the overall supervision of our Board, the Adviser manages the day-to-day operations of the Company, and provides investment management services. As of December 31, 2024 and 2023, as consideration for the Adviser’s services under the Advisory Agreement, we pay our Adviser an annual fee (the "Advisory Fee") of 1.00 % of Managed Assets (defined below) and an annual fee (the "Administrative Fee" and, together with the Advisory Fee, the "Fees") of 0.20 % of the Company’s Managed Assets. On July 22, 2024, we entered into an amendment to the Advisory Agreement whereby the monthly installment of the Administrative Fee shall be paid in cash and the monthly installment of the Advisory Fee shall be paid in one-half in cash and one-half in common shares of the Company, subject to certain restrictions including that in no event shall the common shares issued to the Adviser under the Advisory Agreement exceed five percent of the number of common shares or five percent of the voting power of the Company outstanding prior to the first such issuance (the “Share Cap”) and that in no event shall the common shares issued to the Adviser under the Advisory Agreement exceed 6,000,000 common shares; provided, however, that the Share Cap will not apply if the Company’s shareholders have approved issuances in excess of the Share Cap. At the Company’s 2023 annual meeting of shareholders, the Company’s shareholders did not approve 134 Table of Contents issuances in excess of the Share Cap. During the year ended December 31, 2024, we issued 867,626.62 common shares to the Adviser in payment of the Fees in an amount of $ 5.54 million. Under the Advisory Agreement, “Managed Assets” means an amount equal to the total assets of the Company, including any form of leverage, minus all accrued expenses incurred in the normal course of operations, but not excluding any liabilities or obligations attributable to leverage obtained through (i) indebtedness of any type (including, without limitation, borrowing to purchase or develop real estate or other investments, borrowing through a credit facility, or the issuance of debt securities), (ii) the issuance of preferred shares or other preference securities, (iii) the reinvestment of collateral received for securities loaned in accordance with the Company’s investment objectives and policies, and/or (iv) any other means. In the event the Company holds collateralized mortgage-backed securities ("CMBS") where the Company holds the controlling tranche of the securitization and is required to consolidate under U.S. GAAP all assets and liabilities of a specific CMBS trust, the consolidated assets and liabilities of the consolidated trust will be netted to calculate the allowable amount to be included as Managed Assets. In addition, in the event the Company consolidates another entity it does not wholly own as a result of owning a controlling interest in such entity or otherwise, Managed Assets will be calculated without giving effect to such consolidation and instead such entity’s assets, leverage, expenses, liabilities and obligations will, on a pro rata basis consistent with the Company’s percentage ownership, be considered those of the Company for purposes of calculation of Managed Assets. The Adviser computes Managed Assets as of the end of each fiscal quarter and then computes each installment of the Fees as promptly as possible after the end of the month with respect to which such installment is payable. Advisory Fees, NHT NHT is externally managed by the NHT Adviser. In accordance with the agreement entered into with the NHT Adviser (the “NHT Advisory Agreement”), the Company pays the NHT Adviser an advisory fee equal to 1.00 % of the REIT Asset Value (as defined below). Under the direct supervision of the REIT, the duties performed by NHT’s Adviser under the terms of the NHT Advisory Agreement include, but are not limited to: providing daily management for NHT, selecting and working with third party service providers, overseeing the third party manager, formulating an investment strategy for NHT and selecting suitable properties and investments, managing NHT’s outstanding debt and its interest rate exposure through derivative instruments, determining when to sell assets, and managing the renovation program or overseeing a third party vendor that implements the renovation program. REIT Asset Value means the value of NHT’s total assets, as determined in accordance with International Financial Reporting Standards (IFRS) except that such value shall only consolidate NHT’s and NHT Holdings, LLC assets plus NHT’s pro rata share of leverage at NHT OP. Pursuant to the terms of the NHT Advisory Agreement, NHT will reimburse the NHT Adviser for all documented Operating Expenses and offering expenses it incurs on behalf of NHT. “Operating Expenses” include legal, accounting, financial and due diligence services performed by the NHT Adviser that outside professionals or outside consultants would otherwise perform and NHT’s pro rata share of rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of the NHT Adviser required for NHT’s operations. Operating Expenses do not include expenses for the advisory services described in the NHT Advisory Agreement. Certain Operating Expenses, such as NHT’s ratable share of rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses incurred by the NHT Adviser or its affiliates that relate to the operations of NHT, may be billed monthly to NHT under a shared services agreement. As of April 19, 2024, the date of the NHT Acquisition, NHT had a payable balance of advisory fees of $ 6.5 million. As of December 31, 2024 there is a remaining payable of advisory fees of $ 7.4 million. Reimbursement of Expenses; Expense Cap, NXDT We also generally reimburse our Adviser for operating or offering expenses it incurs on our behalf or in connection with the services it performs for us. Prior to June 30, 2023, direct payment of operating expenses by us together with reimbursement of operating expenses to the Adviser, plus compensation expenses relating to equity awards granted under a long-term incentive plan and all other corporate general and administrative expenses of the Company, including the Fees payable under the Advisory Agreement, could not exceed 1.5 % of Managed Assets (the “Expense Cap”), calculated as of the end of each quarter, for the twelve-month period following the Company’s receipt of the Deregistration Order. This limitation ended on June 30, 2023 and did not apply to Offering Expenses, legal, accounting, financial, due diligence and other service fees incurred in connection with extraordinary litigation and mergers and acquisitions or other events outside the ordinary course of our business or any out-of-pocket acquisition or due diligence expenses incurred in connection with the acquisition or disposition of certain real estate-related investments; provided, in the event the Company consolidates another entity that it does not wholly own as a result of owning a controlling interest in such entity or otherwise, expenses 135 Table of Contents will be calculated without giving effect to such consolidation and instead such entity’s expenses will, on a pro rata basis consistent with the Company’s percentage ownership, be considered those of the Company for purposes of calculation of expenses. The Adviser may, at its discretion and at any time, waive its right to reimbursement for eligible out-of-pocket expenses paid on the Company’s behalf. Once waived, those expenses are considered permanently waived and became non-recoupable. The Advisory Agreement has an initial term of three years that will expire on July 1, 2025, and successive additional one-year terms thereafter unless earlier terminated. We have the right to terminate the Advisory Agreement on 30 days’ written notice upon the occurrence of a cause event (as defined in the Advisory Agreement). The Advisory Agreement can be terminated by us or the Adviser without cause upon the expiration of the then-current term with at least 180 days’ written notice to the other party prior to the expiration of such term. The Adviser may also terminate the agreement with 30 days’ written notice if we have materially breached the agreement and such breach has continued for 30 days before we are given such notice. In addition, the Advisory Agreement will automatically terminate in the event of an Advisers Act Assignment (as defined in the Advisory Agreement) unless we provide written consent. A termination fee will be payable to the Adviser by us upon termination of the Advisory Agreement for any reason, including non-renewal, other than a termination by us upon the occurrence of a cause event or due to an Advisers Act Assignment. The termination fee will be equal to three times the Fees earned by the Adviser during the twelve month period immediately preceding the most recently completed calendar quarter prior to the effective termination date; provided, however, if the Advisory Agreement is terminated prior to the one year anniversary of the date of the Advisory Agreement, the Fees earned during such period will be annualized for purposes of calculating the Fees. For the years ended December 31, 2024 and 2023, the Company incurred Administrative Fees and Advisory Fees of $ 13.3 million and $ 13.7 million, respectively, which excludes $ 0 and $ 2.0 million, respectively in fees that were waived to comply with the Expense Cap. Expense Cap, NHT Pursuant to the terms of the NHT Advisory Agreement, expenses paid or incurred by NHT for advisory fees payable to the NHT Adviser, Operating Expenses incurred by the NHT Adviser or its affiliates in connection with the services it provides to NHT and its subsidiaries and compensation expenses relating to equity awards granted under a long-term incentive plan of NHT will not exceed 1.5 % of REIT Asset Value for the calendar year (or part thereof) that the NHT Advisory Agreement is in effect (the “NHT Expense Cap”). The NHT Expense Cap does not apply to legal, accounting, financial, due diligence and other service fees incurred in connection with mergers and acquisitions, extraordinary litigation, or other events outside NHT’s ordinary course of business or any out-of-pocket acquisition or due diligence expenses incurred in connection with the acquisition or disposition of real estate assets. From the date of the NHT Acquisition to the period ended December 31, 2024, NHT incurred expenses subject to the NHT Expense Cap of $ 3.4 million. Internalization Fee, NHT NHT and/or NHT OP may elect to acquire all of the outstanding and issued equity interests of the NHT Adviser (an “NHT Adviser Internalization”) by exercising its rights, in its sole discretion, under the NHT Advisory Agreement (subject to certain terms and conditions) to effect an NHT Adviser Internalization. NHT will pay the Adviser a fee equal to three times the prior 12 months’ advisory fees. Such internalization fee is limited to 7.5 % of the combined equity value of NHT and NHT OP on a consolidated basis as of the date of the NHT Adviser Internalization. Loans from Affiliates As of December 31, 2024, NHT OP has entered into several convertible notes with certain affiliates of the NHT Adviser totaling $ 50.2 million (see Note 6 to our consolidated financial statements). The proceeds of the notes were primarily used for general corporate and working capital purposes and have been consolidated into one account on the Consolidated Balance Sheet. Revolving Credit Facility, NXDT On May 22, 2023, the Company entered into the NexBank Revolver in the initial principal amount of $ 20.0 million, with the option for the Company to receive additional disbursements thereunder up to a maximum amount of $ 50.0 million and bears interest at one-month SOFR plus 3.50 %. The Company drew $ 20.0 million on May 22, 2023. On May 21, 2024, 136 Table of Contents the Company elected to extend the maturity by six months to November 21, 2024. On November 21, 2024, the Company elected to extend the maturity by six months to May 21, 2025. During the year ended December 31, 2024, the Company paid down approximately $ 3.5 million on the principal balance. As of December 31, 2024, the NexBank Revolver had an outstanding balance of $ 16.5 million. Guaranties of NexPoint Storage Partners, Inc. Debt On July 2, 2021, the Company, together with Highland Opportunities and Income Fund (“HFRO”) and Highland Global Allocation Fund (collectively, the “Co-Guarantors”) as limited guarantors, entered into a Guaranty of Recourse Obligations (“SAFStor Recourse Guaranty I”) in favor of ACORE in its capacity as Administrative Agent for and on behalf of the Lenders under a Loan Agreement ("SAFStor Loan Agreement I"), in an aggregate principal amount of $ 235.86 million, for the benefit of entities indirectly owned by SAFStor NREA JV – I, LLC (“SAFStor – I”), SAFStor NREA JV – III, LLC (“SAFStor – III”), SAFStor NREA JV – IV, LLC (“SAFStor – IV”), SAFStor NREA JV – V, LLC (“SAFStor – V”), SAFStor NREA JV – VI, LLC (“SAFStor – VI”), SAFStor NREA JV – VII, LLC (“SAFStor – VII”), and SAFStor NREA JV – VIII, LLC (“SAFStor – VIII”) (collectively, “SAFStor”), pursuant to which the Company and the Co-Guarantors guaranteed certain obligations of SAFStor. On July 2, 2021, the Company also entered a substantively identical guaranty in favor of ACORE in its capacity as Administrative Agent for and on behalf of the Lenders under a Mezzanine Loan Agreement ("SAFStor Mezzanine Loan Agreement I"), in the amount of $ 6.05 million, for the benefit of entities indirectly owned by SAFStor. On December 8, 2022, NSP completed a transaction that resulted in it acquiring 100 % of the equity interest in SAFStor. On April 24, 2023, the Company joined certain separate guaranties previously made in favor of ACORE by the Co-Guarantors pursuant to an Omnibus Amendment to and Reaffirmation of Loan Documents (the “SAFStor Recourse Guaranty II”) in favor of ACORE in its capacity as (i) Administrative Agent for and on behalf of the Lenders under a Loan Agreement (“SAFStor Loan Agreement II”), in an aggregate principal amount of $ 41.99 million, for the benefit of SAFStor, and (ii) Administrative Agent for and on behalf of the Lenders under a Mezzanine Loan Agreement (“SAFStor Mezzanine Loan Agreement II”), in the amount of $ 1.08 million, for the benefit of entities indirectly owned by SAFStor. Pursuant to the SAFStor Recourse Guaranty I and SAFStor Recourse Guaranty II, the Company guaranteed the loss recourse liability and obligation for any Recourse Liabilities (as defined in the respective SAFStor Loan Agreement) arising out of or in connection with certain bad acts, such as if the borrower took actions that were fraudulent or improper or upon certain violations of the respective SAFStor Loan Agreement. The Company also guaranteed the full payment of the debt upon the occurrence of any Springing Recourse Events (as defined in the respective SAFStor Loan Agreement), such as if the borrower voluntarily filed a bankruptcy or similar liquidation or reorganization action or upon certain other violations of the respective SAFStor Loan Agreement. The guarantees by the Company were limited for loss recourse events, to the loss attributable to properties in which it indirectly owed an interest and for Springing Recourse Events (as defined in the respective SAFStor Loan Agreement) to the pro-rata share of the aggregate liability of all guarantors within the pool of the guarantor properties. On October 4, 2024, NSP paid the debt in full and the guarantees were terminated. On September 14, 2022, the Company entered into guaranties (the “BS Guaranties”) for the benefit of JPMorgan Chase Bank, National Association (“JPM”) and any additional or subsequent lenders from time to time (collectively, “BS Lender”) under a loan agreement (the "BS Loan Agreement"), pursuant to which the Company guaranteed certain obligations of the borrowers (“BS Borrower”) under the BS Loan Agreement. The Company, through its ownership in NSP, owns an indirect interest in BS Borrower and entered into the BS Guaranties as a condition of BS Lender lending to BS Borrower under the BS Loan Agreement. Pursuant to the BS Guaranties, the Company guaranteed certain carrying obligations, including interest payments, of BS Borrower and certain recourse obligations of BS Borrower pertaining to exculpation or indemnification of BS Lender. The BS Guaranties also provided that the Company could be required to repay principal amounts upon the occurrence of certain events, including certain action or inaction by BS Borrower, but did not provide for a full guarantee of repayment in all circumstances. The BS Loan Agreement provided for a single initial advance of the loan in the amount of $ 221.8 million to BS Borrower on the closing date and provided BS Borrower the right to request additional advances in connection with subsequently acquired properties. Amounts outstanding under the BS Loan Agreement were due and payable on March 9, 2024 which date could, at the option of BS Borrower, be extended for an additional six months upon the satisfaction of certain terms and conditions. On March 8, 2024, the BS Lender agreed to extend the maturity date to March 22, 2024. On March 22, 2024, the BS Lender agreed to extend the maturity date on the two loans to September 9, 2024. On September 9, 2024, the BS Lender agreed to extend the maturity date on the two loans to October 9, 2024. On October 4, 2024, NSP paid the debt in full and the guarantees were terminated. Separately, on September 14, 2022, the Company entered into a Guaranty Agreement (Recourse Obligations), dated September 14, 2022 (the “CMBS Guaranty”) for the benefit of JPM and any additional or subsequent lenders from time to time (collectively, the “CMBS Lender”) under a loan agreement (the "CMBS Loan Agreement"), by and among the 137 Table of Contents borrowers thereunder (collectively, “CMBS Borrower”) and the CMBS Lender. The CMBS Loan Agreement provided for a loan of $ 356.5 million to CMBS Borrower. The Company, through its ownership in NSP, owns an indirect interest in CMBS Borrower and entered into the CMBS Guaranty as a condition of the CMBS Loan Agreement. Pursuant to the CMBS Guaranty, the Company guaranteed certain recourse obligations of CMBS Borrower pertaining to exculpation or indemnification of CMBS Lender, but did not provide for a full guarantee of repayment in all circumstances. Amounts outstanding under the CMBS Loan Agreement were due and payable on September 9, 2024. On September 9, 2024, the CMBS Lender and NSP entered into a forbearance agreement, and the CMBS Lender agreed to, until October 9, 2024, forbear from proceeding to exercise its remedies relating to the failure to repay the debt by September 9, 2024. On October 4, 2024, NSP repaid the debt in full and the guarantees were terminated. On October 4, 2024, the Company entered into a Guaranty Agreement (Recourse Obligations), dated October 4, 2024 (the “Citi Guaranty”) for the benefit of JPM and Citi Real Estate Funding, Inc. (collectively, the “Citi Lender”) under a loan agreement (the "Citi Loan Agreement"), by and among the borrowers thereunder (collectively, “Citi Borrower”) and the Citi Lender. The Company is the owner of an indirect interest in Citi Borrower and entered into the Citi Guaranty as a condition of the Citi Lender lending to Citi Borrower under the Citi Loan Agreement. Pursuant to the Citi Guaranty, the Company guarantees the Guaranteed Obligations (as defined in the Citi Loan Agreement). The Guaranteed Obligations consist of liability for losses suffered by the Citi Lender arising out of certain bad acts, such as if the Citi Borrower takes actions that are fraudulent or improper or upon certain violations of the Citi Loan Agreement. The Guaranteed Obligations also include the full payment of the debt upon the occurrence of certain events including borrower voluntarily filing for bankruptcy or similar liquidation or reorganization action or upon certain other violations of the Citi Loan Agreement. The Citi Loan Agreement provides for a loan of $ 750.0 million to Citi Borrower. The Citi Loan Agreement is set to mature on November 1, 2029. Borrowings outstanding under the Citi Loan Agreement are secured by mortgages on real property owned by one or more of the borrowers comprising Citi Borrower. On December 8, 2022 and in connection with a restructuring of NSP, the Company, together with NREF, HFRO and NexPoint Real Estate Strategies Fund (collectively, the "NSP Co-Guarantors"), as guarantors, entered into a Sponsor Guaranty Agreement in favor of Extra Space Storage, LP ("Extra Space") pursuant to which the Company and the NSP Co-Guarantors guaranteed obligations of NSP with respect to accrued dividends on NSP’s newly created Series D Preferred Stock and two promissory notes in an aggregate principal amount of approximately $ 64.2 million issued to Extra Space. The guaranties by the Company and the NSP Co-Guarantors were capped at $ 97.6 million, and each of the Company and the NSP Co-Guarantors generally guaranteed the foregoing obligations of NSP up to the cap amount on a pro rata basis with respect to its percentage ownership of NSP’s common stock. On February 15, 2023, NSP paid down approximately $ 15.0 million of these promissory notes, resulting in an aggregate principal amount of approximately $ 49.2 million. On December 8, 2023, NSP paid down the remaining principal balance of $ 49.2 million. The Series D Preferred Stock remains outstanding as of December 31, 2024. As of December 31, 2024, the outstanding NSP Series D Preferred Stock accrued dividends were $ 11.9 million, and the Company and NREF OP IV REIT Sub, LLC are jointly and severally liable for 85.90 % of the guaranteed amount. Subsidiary Investment Management Agreement SFP is a party to a management agreement (the "SFP IMA") with NexAnnuity pursuant to which NexAnnuity provides investment management services to SFP. Mr. Dondero serves as President of NexAnnuity, which is indirectly owned by a trust of which Mr. Dondero is the primary beneficiary. As discussed in Note 11, the Company disposed of its interest in SFP on September 1, 2023. Prior to its disposition, the Company paid $ 0.1 million in management fees to NexAnnuity. In exchange for its services, the SFP IMA provided that NexAnnuity would receive a management fee (the "SFP Management Fee") paid monthly in an amount equal to 1.0 % of the average weekly value of an amount equal to the total assets of SFP, including any form of leverage, minus all accrued expenses incurred in the normal course of operations, but not excluding any liabilities or obligations attributable to investment leverage obtained through (i) indebtedness of any type (including, without limitation, borrowing through a credit facility or the issuance of debt securities), (ii) the issuance of preferred stock or other preference securities, (iii) the reinvestment of collateral received for securities loaned in accordance with the investment objective, investment guidelines and policies under the SFP IMA, and/or (iv) any other means, plus any value added tax or any other applicable tax, if any, thereon. NexAnnuity could waive all or a portion of the SFP Management Fee. 138 Table of Contents NREF OP Promissory Note On April 19, 2024, the Company, through the OP, loaned $ 6.5 million to NREF OP IV, L.P. ("NREF OP IV"). In connection with the loan, NREF OP IV issued a promissory note to the OP in the principal amount of $ 6.5 million bearing interest at 7.535 %, which is payable in kind, interest only during the term and matures on April 19, 2029. NREF OP IV is a subsidiary of NREF, which is managed by an affiliate of the Adviser. On September 11, 2024, NREF OP IV extinguished the note and paid down the remaining principal balance and accrued interest. NFRO SFR REIT Promissory Notes On December 14, 2023, the Company, through the OP, loaned approximately $ 3.6 million to NFRO SFR REIT, LLC (“NFRO SFR REIT”). In connection with the loan, NFRO SFR REIT issued a promissory note to the OP in the principal amount of approximately $ 3.6 million bearing interest at 7.535 % per annum, which is payable in kind, interest only during the term and matures on June 14, 2025. On February 15, 2024, the Company, through the OP, loaned approximately $ 3.2 million to NFRO SFR REIT. In connection with the loan, NFRO SFR REIT issued a promissory note to the OP in the principal amount of approximately $ 3.2 million bearing interest at 7.535 % per annum, which is payable in kind, interest only during the term and matures on August 15, 2025. NFRO SFR REIT is a subsidiary of an entity that is advised by an affiliate of the Adviser. Investments in DSTs On July 26, 2024, the Company, through NREO, acquired $ 4.6 million worth of Class 1 in NexPoint Life Sciences II DST ("Life Sciences DST"), a Delaware statutory trust. Life Sciences DST is managed by an affiliate of the Adviser. Life Sciences DST owns a manufacturing and production facility in Philadelphia, PA that is under a triple net lease. On July 26, 2024, the Company, through NREO, acquired $ 14.9 million worth of Class 1 in NexPoint Semiconductor DST ("Semiconductor DST"), a Delaware statutory trust. Semiconductor DST is managed by an affiliate of the Adviser. Semiconductor DST owns a semiconductor manufacturing property in Temecula, CA that is under a triple net lease. On September 11, 2024, the Company acquired an additional $ 6.1 million worth of Class 1 in Semiconductor DST. Capital Acquisitions Partners, LLC The Company owns approximately 20.9 % of the total outstanding membership interests of Capital Acquisitions Partners, LLC, an entity that invests in multifamily housing. The remaining membership interests are held by NREF OP. See Notes 7 and 8 for additional information. SFR WLIF III, LLC On November 25, 2024, SFR WLIF III, LLC, redeemed all of the interests in SFR WLIF III, LLC. The Company received approximately $ 7.2 million upon redemption of its interests in SFR WLIF III, LLC. IQHQ Transactions On May 23, 2024, the Company, through the OP, along with certain entities advised by affiliates of our Adviser or that may be deemed an affiliate of the Adviser through common beneficial ownership, entered into a participation rights agreement with NexPoint Bridge Investor I, LLC (“Bridge Investor I”), an entity owned by an affiliate of the Adviser, pursuant to which the Company had a right to fund up to specified amounts of the IQHQ Promissory Note and the IQHQ Bridge Warrant. On December 31, 2024, the Company, through certain subsidiaries, along with certain entities advised by affiliates of our Adviser or that may be deemed an affiliate of the Adviser through common beneficial ownership, entered into a participation rights agreement with Bridge Investor I pursuant to which the Company has a right to fund up to specified amounts of the IQHQ Subscription Agreement and the IQHQ Series E Warrant. 139 Table of Contents Other Related Party Transactions The Company has in the past, and may in the future, utilize the services of affiliated parties. The Company holds multiple operating accounts at NexBank. The Company’s operating properties, other than undeveloped land, are managed by NexVest Realty Advisors, LLC ("NexVest"), an affiliate of the Adviser. For the year ended December 31, 2024 the Company through its subsidiaries has paid approximately $ 0.7 million in property management fees to NexVest. For the year ended December 31, 2023, the Company through its subsidiaries has paid approximately $ 0.7 million in property management fees to NexVest. The property management agreement with NexVest for the retail property in Lubbock, Texas is dated January 1, 2014 and had a fixed fee of $ 750 per month. Effective January 1, 2023, the property management agreement was amended and the property management fee was increased to $ 1,200 per month. The property management agreement with NexVest for Cityplace is dated August 15, 2018, and the management fee is calculated on 3 % of gross revenues, with a minimum fee of $ 20,000 per month. The property management agreement with NexVest for the White Rock Center is dated June 1, 2013, and the management fee is calculated on 4 % of gross receipts, payable monthly. The property management agreement with NexVest for Cityplace also allows for the manager, as the agent of CP Tower Owner, LLC (“Owner”), to draw on the operating account when required in connection with the operation or maintenance of the property, the payment of certain expenses defined in the agreement, or as expressly approved in writing by Owner. For the year ended December 31, 2024, the SPE holding Cityplace reimbursed $ 1.8 million to NexVest for these expenses. For the year ended December 31, 2023, the SPE holding Cityplace reimbursed $ 1.9 million to NexVest for these expenses. A director and officer of the Company also (i) is the beneficiary of a trust that indirectly owns 100 % of the limited partnership interests in the parent of the Adviser and directly owns 100 % of the general partnership interests in the parent of the Adviser and (ii) is a director of NexBank Capital, the holding company of NexBank, directly owns a minority of the common stock of NexBank, and is the beneficiary of a trust that directly owns a substantial portion of the common stock of NexBank. The Company is a guarantor and an indemnitor on a loan from OSL, an entity that may be deemed an affiliate of the Adviser through common beneficial ownership, taken by Freedom LHV which owns White Rock Center, with an aggregate principal amount of $ 10.0 million as of December 31, 2024. The obligations include a continuing guarantee, which is generally applicable to all current and future liabilities or obligations of the borrower, whether directly or indirectly incurred, including through an agreement with an affiliate, joint venture partner or other third party. This guarantee remains in effect until all such obligations have been satisfied in full, unless terminated in accordance with the terms of the guarantee agreement. The loan is secured by certain real property held by Freedom LHV. On December 8, 2022, the Company, through NREO, entered into a Contribution Agreement pursuant to which NREO contributed all of its interests in the joint ventures (the "SAFStor Ventures") with SAFStor NREA GP – I, LLC, SAFStor NREA GP – II, LLC and NREA GP – III, LLC to NexPoint Storage Partners Operating Company, LLC (the "NSP OC") in exchange for approximately 47,064 newly created Class B common operating company units of the NSP OC ("Class B Units"), representing 14.8 % of the outstanding combined classes of common units of the NSP OC (the "NSP OC Common Units") immediately after NREO’s acquisition of Class B Units. The NSP OC is the operating company of NSP, of which the Company owns approximately 86,369 shares, or 52.8 %, of the outstanding common stock as of December 31, 2024. In connection with the foregoing, the NSP OC acquired all of the other interests in the SAFStor Ventures from affiliates of the Adviser following which they were wholly owned by a subsidiary of the NSP OC. The SAFStor Ventures are invested, through subsidiaries, in various self-storage real estate development projects primarily located on the East Coast of the United States. As of December 31, 2024, the Company owns approximately 47,064 Class B Units, or 29.5 %, of the outstanding NSP OC Common Units. On September 1, 2023, the Company, through one of its wholly owned TRSs, entered into a contribution agreement to transfer the Structured Note in SFP and all its rights, title and interests to related party NHI and its wholly owned subsidiaries. The Company also transferred all of its ordinary shares in SFP to a separate share trustee. In exchange, the Company was issued 68,500 shares of Class A Preferred Stock in NHI and owns 69,895 and 66,268 shares, respectively, as of December 31, 2024 and 2023. 140 Table of Contents Related Party Investments The Company, from time to time, may invest in entities managed by affiliates of the Adviser. For the year ended and as of December 31, 2024, the Company had the following investments in entities managed or advised by, or directly or indirectly owned by entities managed or advised by, affiliates of the Adviser (in thousands). Related Party Investment Fair Value/Carrying Value Change in Unrealized Gain/(Loss) Realized Gain/(Loss) Equity in income (loss) Interest and Dividends Total Income NexPoint Real Estate Finance, Inc. Common Stock $ 32,949 $ ( 126 ) $ — $ — $ 4,200 $ 4,074 NexPoint Storage Partners, Inc. Common Stock 62,709 ( 5,478 ) — — — ( 5,478 ) NexPoint Residential Trust, Inc. Common Stock 4,018 692 — — 180 872 NexPoint SFR Operating Partnership, L.P. Convertible Notes 20,846 32 — — 1,636 1,668 NexPoint Hospitality Trust Common Stock — 2,088 (1) — — — 2,088 NexPoint Storage Partners Operating Company, LLC LLC Units 34,172 ( 2,985 ) — — — ( 2,985 ) SFR WLIF III, LLC LLC Units — — 339 523 — 862 Claymore Holdings, LLC LLC Units — ( 589 ) — — — ( 589 ) Allenby, LLC LLC Units — ( 153 ) — — — ( 153 ) Haygood, LLC. LLC Units — — — — — — VineBrook Homes Operating Partnership, L.P. Partnership Units 151,706 2,247 — — 5,926 8,173 NexPoint Real Estate Finance Operating Partnership, L.P. Partnership Units 76,396 ( 292 ) — — 9,738 9,446 NexPoint SFR Operating Partnership, L.P. Partnership Units 37,953 ( 13,946 ) — — 2,516 ( 11,430 ) NexAnnuity Holdings, Inc. Preferred Shares 69,895 — — — 5,327 5,327 NexPoint Hospitality Trust Promissory Note — ( 308 ) (1) — — — ( 308 ) NexPoint Storage Partners Operating Company, LLC Promissory Note 2,765 ( 11 ) — — 211 200 NexPoint SFR Operating Partnership, L.P. Promissory Note 500 — — — 45 45 NFRO SFR REIT, LLC Promissory Note 3,432 — — — 222 222 NFRO SFR REIT, LLC Promissory Note 3,883 — — — 298 298 141 Table of Contents Related Party Investment Fair Value/Carrying Value Change in Unrealized Gain/(Loss) Realized Gain/(Loss) Equity in income (loss) Interest and Dividends Total Income NREF OP IV, L.P. Promissory Note — — — — 188 188 Semiconductor DST LLC Units 20,959 — — — 379 379 Life Science II DST LLC Units 9,600 — — — 262 262 Capital Acquisitions Partners, LLC LLC Units 407 — — 126 — 126 Total $ 532,190 $ ( 18,829 ) $ 339 $ 649 $ 31,128 $ 13,287 (1) Reflects the change in unrealized gain/(loss) prior to the NHT consolidation. For the year ended and as of December 31, 2023, the Company had the following investments in entities managed or advised by, or directly or indirectly owned by entities managed or advised by, affiliates of the Adviser (in thousands). Related Party Investment Fair Value/Carrying Value Change in Unrealized Gain/(Loss) Equity in income (loss) Interest and Dividends Total Income NexPoint Hospitality Trust Common Stock $ 4,886 $ ( 22,800 ) $ — $ 610 $ ( 22,190 ) NexPoint Real Estate Finance, Inc. Common Stock 33,075 ( 294 ) — 5,754 5,460 NexPoint Storage Partners, Inc. Common Stock 68,187 ( 35,506 ) — — ( 35,506 ) NexPoint Residential Trust, Inc. Common Stock 3,154 ( 821 ) — 155 ( 666 ) NexPoint SFR Operating Partnership, L.P. Convertible Notes 20,814 7 — 1,822 1,829 NexPoint Hospitality Trust Convertible Notes 21,437 ( 166 ) — 644 478 NexPoint Storage Partners Operating Company, LLC LLC Units 37,157 ( 19,349 ) — — ( 19,349 ) SFR WLIF III, LLC LLC Units 7,079 — 624 — 624 Claymore Holdings, LLC LLC Units — — — — — 142 Table of Contents Allenby, LLC LLC Units — ( 304 ) — — ( 304 ) Haygood, LLC. LLC Units — ( 31 ) — — ( 31 ) VineBrook Homes Operating Partnership, L.P. Partnership Units 146,516 ( 27,463 ) — 4,318 ( 23,145 ) NexPoint Real Estate Finance Operating Partnership, L.P. Partnership Units 76,688 ( 682 ) — 11,686 11,004 NexPoint SFR Operating Partnership, L.P. Partnership Units 49,383 ( 5,308 ) — 1,813 ( 3,495 ) NexAnnuity Holdings, Inc. Preferred Shares 66,268 — — 1,768 1,768 NexPoint Storage Partners Operating Company, LLC Promissory Note 5,000 — — 39 39 NexPoint SFR Operating Partnership, L.P. Promissory Note 500 — — 8 8 Total $ 540,144 $ ( 112,717 ) $ 624 $ 28,617 $ ( 83,476 ) 15. Commitments and Contingencies Commitments On December 8, 2022 and in connection with a restructuring of NSP, the Company, together with the NSP Co-Guarantors, as guarantors, entered into a Sponsor Guaranty Agreement in favor of Extra Space pursuant to which the Company and the NSP Co-Guarantors guaranteed obligations of NSP with respect to accrued dividends on NSP’s newly created Series D Preferred Stock and two promissory notes in an aggregate principal amount of approximately $ 64.2 million issued to Extra Space, which were paid in full on December 8, 2023. The NSP Series D Preferred Stock remains outstanding as of December 31, 2024. As of December 31, 2024, the outstanding NSP Series D Preferred Stock accrued dividends were $ 11.9 million. See Note 14 to our consolidated financial statements for additional information. On October 4, 2024, the Company entered into the Citi Guaranty for the benefit of the Citi Lender under the Citi Loan Agreement, by and among Citi Borrower and the Citi Lender. Pursuant to the Citi Guaranty, the Company guarantees the Guaranteed Obligations (as defined in the Citi Loan Agreement). The Guaranteed Obligations consist of liability for losses suffered by the Citi Lender arising out of certain bad acts, such as if the borrower takes actions that are fraudulent or improper or upon certain violations of the Citi Loan Agreement. The Guaranteed Obligations also include the full payment of the debt upon the occurrence of certain events including borrower voluntarily filing for bankruptcy or similar liquidation or reorganization action or upon certain other violations of the Citi Loan Agreement. See Note 14 to our consolidated financial statements for additional information. On July 2, 2021, the Company, together the Co-Guarantors as limited guarantors, entered into a SAFStor Recourse Guaranty I in favor of ACORE in an aggregate principal amount of $ 235.86 million. On July 2, 2021, the Company also entered a substantively identical guaranty in favor of ACORE in the amount of $ 6.05 million. On April 24, 2023, the Company joined certain separate guaranties previously made in favor of ACORE by the Co-Guarantors pursuant to the SAFStor Recourse Guaranty II. On October 4, 2024, NSP paid the debt in full and the guarantees were terminated. See Note 14 to our consolidated financial statements for additional information. The Company is a limited guarantor and an indemnitor on one of NHT's loans with an aggregate principal amount of $ 74.4 million outstanding, as of December 31, 2024. The obligations include a customary environmental indemnity and a so-called "bad boy" guarantee, which is generally only applicable if and when the borrower directly, or indirectly through an agreement with an affiliate, joint venture partner or other third party, voluntarily files a bankruptcy or similar liquidation or reorganization action or takes other actions that are fraudulent or improper. 143 Table of Contents The Company is a guarantor and an indemnitor on a loan taken by the SPE which owns Cityplace with an aggregate principal amount of $ 139.9 million as of December 31, 2024. The obligations include guarantees, which are generally only applicable if and when the borrower, which is a subsidiary of the Company, directly, or indirectly through an agreement with an affiliate, joint venture partner or other third party, voluntarily terminates construction services prior to the completion of the project, files a bankruptcy or similar liquidation or reorganization action or takes other actions that are fraudulent or improper. As of December 31, 2024, management does not anticipate any material deviations from schedule or budget related to construction projects current in process, and Cityplace is current on all debt payments and in compliance with all debt compliance provisions. The Company is a guarantor and an indemnitor on a loan from OSL, an entity that may be deemed an affiliate of the Adviser through common beneficial ownership, taken by Freedom LHV which owns White Rock Center. As of December 31, 2024, the loan had an outstanding amount of $ 10.0 million. As the guarantor, it owes obligations including a continuing guarantee, which is generally applicable to all current and future liabilities or obligations of the borrower under the loan agreement. This guarantee remains in effect until all such obligations have been satisfied in full, unless terminated in accordance with the terms of the guarantee agreement. As the indemnitor, it owes customary environmental indemnifications. The Company has not recorded a contingent liability as White Rock Center is current on all debt payments and in compliance with all debt compliance provisions. A subsidiary of the Company, together with Calida Holdings III, LP, is a guarantor and an indemnitor on a loan taken by the SPE that owns Tivoli. As of December 31, 2024, the loan had an outstanding balance of $ 13.5 million. As a guarantor, it owes the obligations including a guaranty of payment, which is generally applicable without the need for the lender to make any demand upon or pursue any rights or remedies against the borrower or any other loan party. The guarantor’s liability is immediate and not contingent on prior actions taken by the lender against other parties. As an indemnitor, it owes customary environmental indemnifications. The Company has not recorded a contingent liability as Tivoli is current on all debt payments and in compliance with all debt compliance provisions. The Company is a guarantor and an indemnitor on a revolving credit facility entered into by the Company, and two wholly owned subsidiaries with NexBank. As of December 31, 2024, the NexBank Revolver had an outstanding balance of $ 16.5 million. The Company guarantees the borrowers’ obligations under the loan agreement and the guaranty is a guaranty of payment and performance, not of collection, which is generally applicable without the need for the lender to make any demand upon or pursue any rights or remedies against the borrower or any other loan party. The guarantor’s liability is immediate and not contingent on prior actions taken by the lender against other parties. As an indemnitor, the Company is responsible for indemnifying the lender against losses, claims, damages, and costs (including attorneys' fees) arising from the borrowers’ or any other loan party’s breach of its warranties, representations, and agreements under the loan agreement. The Company has not recorded a contingent liability with respect to this guaranty as the borrowers are current on all debt payments and in compliance with all debt compliance provisions. Contingencies In the normal course of business, the Company is subject to claims, lawsuits, and legal proceedings. While it is not possible to ascertain the ultimate outcome of all such matters, management believes that the aggregate amount of such liabilities, if any, in excess of amounts provided or covered by insurance, will not have a material adverse effect on the Consolidated Balance Sheets or Consolidated Statements of Operations and Comprehensive Income (Loss) of the Company. The Company is not involved in any material litigation nor, to management’s knowledge, is any material litigation currently threatened against the Company or its properties or subsidiaries. Environmental liabilities could have a material adverse effect on the Company’s business, assets, cash flows or results of operations. As of December 31, 2024, the Company was not aware of any environmental liabilities. There can be no assurance that material environmental liabilities do not exist. Claymore, Allenby and Haygood are engaged in ongoing litigation that could result in a possible gain contingency to the Company. The probability, timing, and potential amount of recovery, if any, are unknown. 16. Leases Lessor Accounting 144 Table of Contents The following table summarizes the future minimum lease payments to the Company as the lessor under the operating lease obligations at December 31, 2024 (in thousands). These amounts do not reflect future rental revenues from renewal or replacement of existing leases. Reimbursements of operating expenses and variable rent increases are excluded from the table below. Year: Operating Leases 2025 $ 8,408 2026 7,746 2027 7,021 2028 4,844 2029 4,138 Thereafter 13,343 Total $ 45,500 The following table lists the tenants where the rental revenue from the tenants represented 10% or more of total rental income in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss) (in thousands) for the year ended December 31, 2024: For the Year Ended December 31, 2024 Tenant Rental Income Neiman Marcus Group, LLC $ 2,180 The following table lists the tenants where the rental revenue from the tenants represented 10% or more of total rental income in the Company’s Consolidated Statements of Operations and Comprehensive Income (in thousands) for the year ended December 31, 2023: For the Year Ended December 31, 2023 Tenant Rental Income Hudson Advisors LLC $ 2,610 Ground Lease A subsidiary of NHT OP has a ground lease situated in Durham County, North Carolina, with a subsidiary of OSL, an entity that may be deemed an affiliate of the Adviser through common beneficial ownership. The lease has a remaining term of 4 years and a discount rate of 4.6 % and contains five one-year extension options. As of December 31, 2024, the carrying amount of the right-of-use asset is $ 0.7 million, and the lease liability is $ 0.7 million. The future minimum lease payments under the operating lease as of December 31, 2024 are as follows: Years Ending December 31, Minimum Lease Payment 2025 $ 204 2026 208 2027 212 2028 217 Total undiscounted lease payments 841 Less: Present Value discount ( 120 ) Total lease liability $ 721 145 Table of Contents For the year ended December 31, 2024, the Company recognized lease expense of $ 0.3 million recorded on a straight-line basis over the lease term. 146 Table of Contents 17. Segment Reporting The Company has two reportable segments: NXDT and NHT. For a description of the types of products and services from which these reportable segments derive their revenues, see Notes 1, 2 and 3. The accounting policies of both segments are the same as those described in the Summary of Significant Accounting Policies. The chief operating decision maker primarily assesses performance for the segments and decides how to allocate resources based on segment net income (loss). The measures of segment assets are based on each segment’s total assets. The chief operating decision maker uses segment net income (loss) to evaluate profitability in deciding whether to reinvest profits into new or existing investments or into other parts of the entity, such as for dividend amounts. The Company’s two reportable segments serve different strategic purposes. The NXDT segment primarily consists of activities focused on investing in various commercial real estate property types and across the capital structure, including but not limited to equity, mortgage debt, mezzanine debt and preferred equity. The majority of NXDT’s revenue is comprised of Rental income, Dividend income, and Interest income. The NHT segment primarily consists of acquiring additional U.S. located hospitality assets that meet its investment objective and criteria and seeking to own, renovate and operate its portfolio of income-producing hotel properties. The majority of NHT’s revenue is 147 Table of Contents comprised of revenue from renting rooms and selling food and beverages (“F&B”). Therefore, the Company has identified NXDT and NHT as the two operating segments and the two reportable segments. The Company’s chief operating decision maker is the president of the Company. The following table presents measures of the reportable segment measures of profitability, along with significant segment expenses (in thousands): For the Year Ended December 31, 2024 For the Year Ended December 31, 2023 NexPoint Diversified Real Estate Trust NexPoint Hospitality Trust Total NexPoint Diversified Real Estate Trust (1) Total Revenues $ 52,990 $ 30,232 $ 83,222 $ 63,284 Less: Advisory and administrative fees 13,286 879 14,165 11,740 Corporate general and administrative expenses 9,947 2,856 12,803 7,981 Real estate taxes and insurance 4,836 1,708 6,544 4,377 Property operating expense 6,517 15,738 22,255 7,489 Interest expense 17,443 10,909 28,352 15,902 Realized (gains) losses from non-real estate investments 21,479 — 21,479 1,634 Change in unrealized (gains) losses from non-real estate investments 1,348 — 1,348 108,249 Property general and administrative expenses 2,878 4,527 7,405 4,250 Impairment loss — 7,110 7,110 — Income tax expense (benefit) 1,441 ( 69 ) 1,372 2,731 Depreciation and amortization 11,698 3,902 15,600 13,937 Equity in (income) losses of unconsolidated equity method ventures ( 129 ) — ( 129 ) 306 Other segment items (2) 734 757 1,491 1,929 Net loss $ ( 38,488 ) $ ( 18,085 ) $ ( 56,573 ) $ ( 117,241 ) The following table presents total assets for the reportable segments (in thousands): As of December 31, 2024 As of December 31, 2023 NexPoint Diversified Real Estate Trust NexPoint Hospitality Trust Total NexPoint Diversified Real Estate Trust (1) Total assets $ 1,039,392 $ 185,447 $ 1,224,839 $ 1,098,336 (1) For the year ended December 31, 2023, the Company only had 1 reportable segment, NXDT. (2) Other segment items includes: Property management fees and conversion expenses. 148 Table of Contents 18. Subsequent Events Distributions Declared On February 18, 2025, the Board approved a quarterly distribution of $ 0.15 per common share, payable on March 31, 2025 to shareholders of record on March 14, 2025. The distribution on the Company’s common shares consists of a combination of cash and shares, with the cash component of the distribution (other than cash paid in lieu of fractional shares) not to exceed 20 % in the aggregate, with the balance being paid in the Company’s common shares. Also on February 18, 2025, the Board approved a quarterly distribution of $ 0.34375 per Series A Preferred Share, payable on March 31, 2025 to shareholders of record on March 24, 2025. On February 18, the Board approved monthly distributions of $ 0.1875 per 9.00 % Series B Cumulative Redeemable Preferred Share each, payable on March 5, 2025 and April 7, 2025 to shareholders of record on February 25, 2025 and March 25, 2025, respectively. NXHT Promissory Note Interest On January 2, 2025, NXHT repaid $ 3.0 million of outstanding interest on a promissory note with a subsidiary of the Company. Semiconductor DST On January 2, 2025, the Company, through a subsidiary, contributed $ 3.0 million to Semiconductor DST, in exchange for LLC interests. Held for Sale, Plano Homewood Suites The Company sold its held for sale property, Plano Homewood Suites, on January 24, 2025, for a sales price of approximately $ 8.7 million. ACORE Debt Paydown, NHT On January 24, 2025, the Company paid down approximately $ 5.5 million and $ 2.6 million, respectively, on its Note A and B loans. Marriott Uptown Refinance On January 21, 2025, the Company received a distribution of approximately $ 15.0 million as a result of the refinance of Marriott Uptown. Series B Preferred Shares Offering On January 30, 2025, the Company announced the launch of a continuous public offering of up to 16,000,000 shares of its newly designated Series B Preferred Shares at a price to the public of $ 25.00 per share, for gross proceeds of $ 400.0 million. The Series B Preferred Shares are convertible at the option of the holder thereof into our common shares beginning on the first day of the month following the third anniversary of the date of original issuance of the shares to be converted if the 5-day volume weighted average price of our common shares on the NYSE ending on the trading day immediately preceding the date the holder delivers a duly completed conversion notice to the Company (such 5-day VWAP, the “Market Price”) represents a 15.0 % premium to the estimated fair market NAV of the Company per common share as most recently published by the Company at the time of issuance of the applicable Series B Preferred Share (the “Minimum Market Price Trigger”). If the Minimum Market Price Trigger is satisfied, the Series B Preferred Shares will be convertible at a 6 %, 10 % or 12 % discount to the Market Price beginning on the first day of the month following the third, fourth and fifth anniversary of the date of original issuance of the shares to be converted, respectively. Beginning on the first day of the calendar month following the date of original issuance, the Series B Preferred Shares are redeemable at the option of the holder at a redemption price per share equal to the stated value of $ 25.00 per share, plus all accrued but unpaid cash distributions and less certain redemption fees. After the first day of the first quarter following the second anniversary of the date of original issuance, the Company also has the option to redeem, in whole or in part, subject to certain restrictions in the Company’s agreement and declaration of trust and the statement of preferences setting forth the terms of the Series B Preferred Shares, at a redemption price per share equal to the stated value of $ 25.00 per share, plus any accrued but unpaid cash distributions. In all optional redemptions, the Company has the right, in its sole discretion, to pay the redemption in cash or in equal value of the Company’s common shares for so long as the common shares are listed or admitted to trading on the NYSE or another national securities exchange or automated quotation system. NexPoint 149 Table of Contents Securities, Inc., an affiliate of the Adviser, serves as the Company’s dealer manager (the "Dealer Manager") in connection with the offering. The Dealer Manager uses its reasonable best efforts to sell the Series B Preferred Shares offered in the offering, and the Company pays the Dealer Manager, subject to the discounts and other special circumstances described or referenced therein, (i) selling commissions of 7.0 % of the aggregate gross proceeds from sales of Series B Preferred Shares in the offering (“Selling Commissions”) and (ii) a dealer manager fee of 3.0 % of the gross proceeds from sales of Series B Preferred Shares in the offering (the “Dealer Manager Fee”). The Dealer Manager, subject to federal and state securities laws, will reallow all or any portion of the Selling Commissions and may reallow a portion of the Dealer Manager Fee to other securities dealers that the Dealer Manager may retain who sold the Series B Preferred Shares as is described more fully in the agreements between such dealers and the Dealer Manager. The Company expects that the offering will terminate on the earlier of the date the Company sells all 16,000,000 Series B Preferred Shares in the offering or August 1, 2027 (which is the third anniversary of the effective date of the Company’s registration statement), which may be extended by the Board in its sole discretion. The Board may elect to terminate this offering at any time. AMS C-STORE JV, LLC Purchase On January 30, 2025, the Company, entered into an agreement to purchase $ 9.2 million of preferred units of AMS C-STORE JV, LLC, a company that builds and operates convenience stores. Issuance of Common Shares to Adviser On January 31, 2025, the Company issued 257,552.62 common shares to the Adviser as payment of a portion of the monthly Advisory Fees pursuant to the Advisory Agreement. NHT PC & B Loan Debt Extension On February 5, 2025, NHT extended the maturity date of the debt with AREEIF Lender, LLC to February 5, 2026. The debt has one remaining one-year extension option. Neiman Marcus Lease On February 7, 2025, Neiman Marcus sent a notice of termination of its lease at Cityplace to the Company. The Company is currently disputing the notice of termination through communication with the tenant. NHT Note A Loan & Note B Loan Extension On March 8, 2025, the maturity dates of the Note A Loan and Note B Loan were extended to April 8, 2025. 150 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures None.